Young homeowners tied to parents

Tiny refrigerators. Ovens the size of microwaves. Bedrooms no bigger than storage closets and far too small to harbour closets of their own: these are just a few of the notoriously microscopic features common to many, many Toronto condominiums.

They are also, according to Sage realestate rep Rebecca Keyzer, some of the things that most astonish the parents of her millennial clients — baby boomers who have not shopped for real estate in decades, but who are understandably keen to take a look at the condos they are shelling out thousands of bucks for.

According to Keyzer, the vast majority of her millennial-aged clients receive some financial help from their families when buying their first home. And many of those generous parents, a lot of whom live outside the city, are shocked by the combined smallness and expensiveness of Toronto condominiums.

“It usually takes a little bit of grooming to get the parents up to speed with what things are selling for,” Keyzer says. The answer is a lot.

Last year, the average price for a Toronto condo surpassed $500,000. Last week, my colleague Tess Kalinowski reported that Canada’s new “mortgage stress test” has made home ownership an even bigger hurdle for millennial buyers. Many of them, Kalinowski reports, require assistance from their parents to afford a down payment.

It turns out, however, that parental assistance in this regard often goes far beyond a financial donation. I spoke to five Toronto real estate agents recently, three of whom told me that nearly 100 per cent of their millennial-aged clients receive financial help from family when buying their first home, and two of whom said about half receive help.

Most interestingly, four of them reported a growing trend in recent years of parents tagging along with millennial clients to showings, negotiating the price of homes and sometimes interfering in the process in a way that displeases their offspring.

“It’s not that often,” says Scott Shallow, a Brad J. Lamb sales rep who specializes in Toronto condos, “but it has happened where they’ve (the millennial client) lost something because the parents got in the way.”

The problem, Shallow says, is that many parents who haven’t explored the market in a very long time may not realize that their expectations are unrealistic and their approach unhelpful.

“As time marches along,” he says, “we see more parents involved … fathers want to prove to their kids, ‘Hey this is my one time that I’m going to show you how to do business.’

“In a market like Toronto, it doesn’t work that way. The buyers don’t have, unfortunately, a lot of cards in their hand. It’s tough for buyers. You can’t be coming in and telling the seller how it’s going to be, because they don’t care.”

Shallow recommends parents try to understand that for many young people looking to buy in the heart of the city, simply getting into the market is crucial and “size is secondary.” So too, apparently, is independence.

It may not be a secret that the only way most millennials can afford to purchase in Toronto is with assistance from their aging parents, but the reality that hundreds of would-be homebuyers are lugging Mom and Dad to showings and occasionally sulking in the background while Dad blows the deal is substantial proof that what looks like full-fledged adult independence in this city is often an illusion.

“When you see this kind of love money come across the table, that is almost the only way millennials are buying real estate right now,” says Charles Park, a broker at ReMax West. “I actually had a parent almost slap her six-foot-seven son, asking him to wake up and be realistic about his expectations. She reminded him where the money was coming from.”

“The parents can’t believe that you want to live in a shoebox,” says Jordan Chong, a sales rep at ReMax Ultimate in Toronto. “Some are stickershocked.”

Chong says he doesn’t mind when parents attend showings, though it does make things more complicated.

“Sometimes we play family therapist making sure everyone is happy,” he says.

The only agent I spoke to whose overall experience contradicts these tales of parental handholding is Toronto agent David Fleming, who is the author of a popular realestate blog.

Fleming contends he’s seen a very different trend emerge recently: that of the millennial homebuyer who refuses a financial gift.

“I have clients who could have gone higher if they got help, but they didn’t like the idea of having their parents involved in the process,” he says.

However, he says he also sees people who simply can’t afford financial independence. For example, one of Fleming’s clients borrowed money from his father at the prevailing interest rate, only to discover when rates eventually fell that his dad would not give him a break. Instead, Fleming says, the client’s father “kept joking with his son, rubbing it in his face that he was making an above average return.”

For the vast majority of Toronto millennials, home ownership is a fantasy. But so, it seems, is independence for a lot of other young people whose financial fates are inextricably linked to their parents.

Emma Teitel is a columnist based in Toronto covering current affairs. Follow her on Twitter: @emmaroseteitel