What I am about to tell you is not based on any scientific evidence or any crazy statistical numbers.

I am strictly making this assumption on what I see day in and day out being in the trenches of this crazy Toronto real estate market. This is the kind of stuff economists couldn't tell you and what the banks don't monitor.

Prices are going up at a rapid pace and yet houses are selling like hotcakes. We all hear the news about historically low interest rates, the influx of foreign investors, and the lack of homes in the core of the city… all these things are absolutely factoring into this hot real estate market and I wont argue that for a second but here is another factor I think is fueling this market and gets virtually no media attention…

GIFTS

Not just any gifts… monetary gifts, and lots of 'em.

I cannot tell you the amount of times I meet that young couple looking to buy their first home accompanied by their parents or the parents scouring the city for a home for their kids… why? Because most people like to know what they're investing in and if Mom & Dad are dishing out the 20% down payment, you better believe they want to have close look at the homes and neighborhoods their kids are wanting to move into.

Whether the parents have the savings to gift to their kids or they simply take some equity out of their home that has doubled in value over the last decade, this is happening more and more. Homeowners have seen such a large increase in their home values that I think makes it easier for them - financially and psychologically - to give a big chunk of that to their kids.

Let's remember, gone are the days of buying a home with zero down payment and 40-year amortizations… qualifying for a mortgage is not easy. Lenders love equity and if you can put down a hefty down payment, things get much easier (not to mention you save on the CMHC insurance).

Now think about it… the potential buyer that has 100K saved up can potentially buy a 400K home… but we all know, 400k doesn't get you anything in this city so now, the parents 'gift' another 100K and all of a sudden, the 700-800K home doesn't seem so far fetched.

This is happening day in and day out in this Toronto real estate market and although there is little to no chatter about this, believe me, it is a huge contributing factor to these home prices.