Tue. Sep 26th, 2023
    Investors Account for 30% of Residential Real Estate Purchases in Canada

    New data reveals that investors are becoming more prevalent in Canada’s housing market, accounting for 30% of all residential real estate purchases in the first part of the year. As home prices continue to rise, investor interest in residential properties as an asset class has grown during the COVID-19 pandemic.

    According to the Bank of Canada, investors were responsible for 30% of home purchases in the first three months of the year, increasing from 28% in the same quarter of the previous year and 22% in the same period in 2020. The central bank defines an investor as a buyer who took out a mortgage to purchase a property while maintaining a mortgage on another home.

    In contrast, the percentage of first-time homebuyers has decreased to 43% in the first quarter of this year from 48% in the same period in 2020. Similarly, repeat buyers fell to 27.5% from 30% over the same period.

    The Bank of Canada acknowledges the growing influence of investors on the housing market, stating that their presence can amplify house price cycles. During housing booms, increased demand from investors can contribute to bidding pressures and intensify price increases. Conversely, when prices are stable or declining, a lower influx of investors can exert downward pressure on housing demand and prices.

    The data also highlight vulnerabilities in the Canadian economy, particularly the elevated level of household indebtedness and high house prices. While some vulnerabilities are increasing, such as slight increases in delinquencies for car loans and installment loans, others are easing. The share of homeowners putting down less than 20% of a property’s purchase price has decreased, and mortgage delinquencies have remained steady at 0.12%.

    The federal government has primarily targeted foreign real estate buyers with restrictions on purchases until the end of 2024, but has not specifically addressed individual domestic real estate investors as it seeks to address affordable housing issues.

    Source: The Globe and Mail [No URL provided]