Statistics indicate a correlation between parents' housing wealth and property values of their children
A new study by Statistics Canada has unveiled striking insights into the relationship between parents’ housing wealth and the property values of their adult children, focusing on the 2021 reference year. The research also sheds light on the extent to which parents co-own property with their children, exploring the reasons behind such arrangements and providing insights into the intergenerational transfer of housing wealth.
Parents owning part of first home buyers' property
According to the study, around one in six residential properties owned by people born in the 1990s (17.3%) were co-owned with their parents in 2021. Notably, these rates were significantly higher in expensive urban markets like Toronto, Vancouver, and Victoria. The correlation between parents’ housing wealth and their children’s property values was particularly pronounced in these regions.
Housing affordability has become a pressing concern in Canada. Despite a decline in housing prices since their peak in 2022, they remain significantly higher than five years ago. This, coupled with rising interest rates, has prompted many young adults to turn to their parents for financial assistance when buying a home. A 2021 Canadian Imperial Bank of Commerce (CIBC) report highlighted that nearly 30% of first-time homebuyers received a monetary gift from their parents, a notable increase from 20% in 2015. However, the study points out that this trend could contribute to inequalities in homeownership access, as not all young adults have the same level of support from their parents.
The study delved into the possible mechanisms by which parents’ housing wealth could influence their children’s property values. It found that parents’ housing wealth was most strongly associated with their children’s property values in Toronto, Kelowna, Vancouver, and Victoria. This relationship was observed even when accounting for the adult children’s income levels, indicating that direct financial assistance and other forms of support from parents play a significant role in these markets.
One aspect of the study examined parent–child co-ownership, revealing that rates were highest in Ontario and British Columbia. This type of co-ownership might indicate multigenerational households, joint investment properties, or mortgage “co-signing.” In more expensive housing markets, such as Toronto and Vancouver, co-ownership often served as a means to secure favourable mortgage conditions, facilitated by parents’ accumulated wealth or credit ratings.
In Toronto, 42.6% of properties owned by people born in the 1990s were co-owned with their parents, while Vancouver’s rate was 46.1%. The study indicates that parent–child co-ownership is closely linked to affordability challenges and the level of parental housing wealth, which may allow parents to help their children enter expensive housing markets.
The study also found that immigrant parents are more likely to co-own properties with their adult children than Canadian-born parents. In Toronto, nearly 81% of co-owning parents were immigrants, while in Vancouver, this figure stood at approximately 77%. This finding aligns with the higher proportions of immigrants in these CMAs and their tendency to co-own properties, suggesting that cultural factors may also influence property ownership patterns.
Implications for future homeownership
This study adds to a broader literature exploring the transmission of economic advantages from parents to children. It underlines that children of homeowners are more likely to own a home, with higher values in property acquisitions, when compared to those whose parents are non-homeowners.
Have something to say about this story? Leave a comment below.
