How much can the average inheritance help young homebuyers?

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Despite interest rates slowly coming down and housing prices appearing to stabilize, homeownership remains a distant reality for many young Canadians today, but Zoocasa Inc. says they are on the verge of a windfall that “will likely reshape the real estate landscape”: inheritance.

The average amount the boomer generation plans to leave their children has reached $940,000, according to an Ipsos survey in 2023, and using $200,000 of that could go a long way toward a down payment on a new home.

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A $200,000 down payment in many of Canada’s largest cities would be enough to cover more than 20 per cent of the average purchase price of a single detached home, Zoocasa said.

“For aspiring homeowners, down payments are the power move that sets the stage for long-term success,” its report said. “In Canada’s ever-shifting real estate game, the size of your down payment can mean the difference between just getting by and genuinely thriving, with its impact changing dramatically depending on the market.”

In the Prairie provinces, a $200,000 down payment would cover a huge chunk of the overall price of the average single detached home. For example, that amount would cover more than 50 per cent of the purchase price of a home in Regina, Saskatoon and Winnipeg. It would also cover 46.6 per cent of a home’s purchase price in Edmonton and 31.7 per cent in Calgary.

In southern Ontario and parts of the Greater Toronto Area, including Hamilton, Kitchener, London and the Niagara region, a $200,000 down payment would cover more than 20 per cent of the average purchase price of a detached home.

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The average inheritance would help homebuyers in Quebec as well, since $200,000 would cover more than 30 per cent of the average home in Montreal and over 50 per cent or even 60 per cent of the average purchase price in some of the province’s other cities.

While larger down payments require a larger upfront investment, they can considerably help bring the monthly mortgage payment down. For example, upping the down payment to 25 per cent from 20 per cent allows homebuyers to save $330 and $291 per month in Vancouver and Toronto, respectively.

But home prices in general are increasing, with the Teranet-National Bank Composite House Price Index rising by 0.3 per cent in October, marking the fourth consecutive monthly increase, though prices fell in Victoria, Halifax, Calgary and Edmonton.

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Canada’s inflation rate climbed to two per cent in October, up from 1.6 per cent in September and cooling expectations of a big interest cut before the end of the year.

The uptick was largely expected as gasoline prices declined at a slower rate compared to a month prior, but core inflation measures also came in above expectations.

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While economists are still predicting another interest rate cut in December, the probability of a 50-basis-point cut has now fallen to 31 per cent, according to the Canadian Chamber of Commerce.

Read more here.

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Today’s Posthaste was written by Ben Cousins, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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