We had another very interesting office meeting recently. First up was the subject of gifted down payments. A Genworth Mortgage Insurance study ascertained that 30% of first-time buyers had their down payments supplied by others. Of that 30%, 1% had inherited money, 5% used wedding gifts and the rest received money from their families.
The second item on the agenda was David Foot’s book, Boom Bust and Echo. First published in May of 1997, he predicted that the Boomers would eventually sell their houses and downsize, thus depressing the real estate market. While some of his predictions materialized he was off the mark about real estate. Rather than trading down, “Boomers” have been buying more luxurious real estate; cottages, farms, often financing these purchases. Many are still working and are treating themselves to the best of everything.
Not all Boomers are “…spending our children’s inheritance.” Many parents are helping their children by providing down payment money for house purchases. This is one of the many contributing factors propping up house prices in the City of Toronto.
The third discussion revolved around a study produced by the London School of Economics that suggested land use policies in the world’s largest cities are, on large part, responsible for the stratospheric price of residential real estate. These policies are established and maintained by “bottom-up” politics. Those who already own have a huge influence over change. Rate Payers groups, environmentalists, Historical Boards and others use their influence to stall growth. If governments took a “top down” approach to development, housing supply would increase faster and prices would either increase more slowly or adjust downward. You might try “dining-out” with this idea should conversation stall at your next social engagement!
Best Wishes for Success,
Are you thinking of downsizing from the family home? Are you helping your children buy a home?