Baby boomers are bailing out Toronto's condo market with huge gifts for their kids
The downtown Toronto condo market continues to bounce back with a vengeance following a full year of steady, pandemic-induced declines, and one of the key drivers behind this trend may surprise you.
Apparently, realtors have seen loads of parents purchasing properties for their dear children in recent months — specifically retiring boomer parents and their sponging millennial spawn.
"Ontario's baby boomers are selling their (typically larger) homes to help their kids break into the housing market," reads a new report from the real estate listing and analysis firm Strata, which attributes rising downtown condo values to "family decisions."
"When seniors would sell in the past, it was strictly to downsize," says realtor Galina Sheveleva. "But there's this trend where older homeowners are cashing out, so they can help their children with a downpayment."
The millennial generation (which encompasses people currently between the ages of 21 and 41) has long been known to source home downpayments from the Bank of Mom and Dad — but this recent phenomenon goes beyond generational transfers of wealth.
Strata realtor Cliff Liu says adult children and their adult parents are growing increasingly worried about how much of a mortgage they'll actually be able to qualify for if new lending rules take effect in June.
"This new stress test is going to cripple a lot of people because it will be much harder to qualify for the mortgage they want," says Liu. "A lot of my clients are feeling the pressure to jump in before June because they think this might be their last chance at home ownership."
The Office of the Superintendent of Financial Institutions (OSFI) of Canada has proposed changes that would require borrowers applying for uninsured mortgages to qualify at rates either two per cent above market or 5.25 per cent — whichever is higher.
The move is meant to cool fast-rising home prices across the country, but the very anticipation of these changes is doing the opposite, if Strata is correct. More condo sales mean more competition and, without enough inventory, higher condo prices.
New figures released this week by the Toronto Regional Real Estate Board (TRREB) show that condominium apartment sales in the GTA were up a staggering 79.8 per cent in the first quarter of 2021 compared to Q1 of 2020.
The average sale price for a condo in downtown Toronto has risen over that same period of time from $675,844 to $708,298.
"While the condo market was slower to recover compared to low-rise market segments, many realtors have noted a marked increase in condo interest since the beginning of 2021," said TRREB president Lisa Patel in a release announcing the numbers on Thursday.
"This interest will likely continue to increase as the economy improves and vaccine take-up accelerates, resulting in more confidence for first-time buyers."
There are obviously many factors at play when it comes to how Toronto's condo market is trending, but this little nugget of insight from Strata is juicy and interesting. Let's hope our parents all feel the same when we email them this article.
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