Canada

Canadian Cities Have Seen Up To 90% of New Real Estate Supply Scooped By Investors

Canadian real estate is being scooped up by investors with excessively cheap credit. Ownership data for residential real estate across four regions show a significant share owned by investors in 2020. What’s most impressive is how fast this trend must have accelerated. Cities have seen up to 90% of recently completed homes go to investors, much higher than normal.

About Today’s Data

Today we’re looking at the share of housing owned by investors across Canada. When we say investors, we mean “non-owner-occupied” housing. Statistics Canada (Stat Can) defines this as a home that’s “vacant, rented out to others, or used as a secondary property.” Since we’re only looking at cities, no one’s shack in the woods is likely to be included. Only data for Ontario, British Columbia (BC), and Atlantic Canada is available. 

Canadian Cities Have Seen Up To 92% of New Supply Go To Investors

Let’s start with some general observations, shall we? About 1 in 5 (21.0%) homes in the median city across the four regions are investor-owned. When isolating new construction (built after 2016), that number rises to 1 in 3 (33.7%) bought by investors. Their ownership of new housing is overrepresented. It’s running about 60% faster than the general market share.

The share of investor-owned housing is more intense in some regions than others. For example, Bay Roberts, Newfoundland, has the highest percentage of investor-owned housing. They own 49.9% of the total stock and 92.1% of recently completed construction. For a city where unemployment is 65% above the national average, it’s not a great setup.

Toronto Has Seen Investors Buy 39% of Recently Completed Homes

Toronto is Canada’s biggest real estate market, and it’s seeing investor-ownership soar. Investors owned 18.4% of the housing stock in 2020, just shy of 1 in 5 homes. Isolating recently completed homes (after 2016), investors owned 39.1% of the new supply. They’re buying at more than double the usual rate. It’s a bigger issue than Teranet transfer data showing investors are city’s largest buyer segment.

Vancouver Has Seen 44% Of Its New Supply Go To Investors

Vancouver real estate shows a similar trend, but a higher share of investors. Investors owned nearly 1 in 4 (23.5%) of total housing supply in 2020. For recent builds, that share jumps to nearly half (44.0%) of the supply. It’s easy to see how Toronto and Vancouver home prices are so distorted. There’s a lot less friction for home prices when you’re passing the costs on to someone else

Ontario Has Seen Investors Buy 1 in 3 New Homes 

Zooming out, investors own an even higher share of Ontario real estate than Toronto has seen. Investors owned 21.6% of total housing stock in 2020 and 34.7% of homes built after 2016. Once again, 1 in 5 homes in Ontario are investor-owned, but they managed to scoop 1 in 3 new homes. Investor owners are a disproportionately large share of new homeownership.

Small towns in Ontario lead when it comes to investor owned housing stock. Wasaga Beach (32.3% of homes), Collingwood (31.4%), and Hawkesbury (30.5%) managed to top the list for the greatest share. New construction ownership for the first two cities is consistent with historical trends. Hawkesbury is an outlier, with 60% of its recent construction going to investors.

Ontario Residential Real Estate Owned By Investors

The share of Ontario’s non-owner occupied housing stock by city, and grouped by the date the home was completed. New construction are homes completed after 2016, while total is the total housing stock.

Source: Statistics Canada; Better Dwelling.

Aside from Hawkesbury, Ontario has a few cities with investors scooping new supply. Elliot Lake has 23.9% of its total housing owned by investors, jumping to 60% for recent completions. Kenora goes from 24.6% of total supply to 57.1% of new supply, the second highest in Ontario.

Then there’s the Kitchener-Cambridge-Waterloo (Kit.-Cam.-Wat.) corridor. Investors owned 18.8% of total supply in 2020, but 46.6% of recent completions. It’s a significant problem for those regions considering it’s a large city with a fast growing population.

Just Under Half of New Homes Completed In BC Are Investor-Owned

BC real estate skews even more towards investors, not surprising anyone. Investors owned about 1 in 4 (24.5%) of homes in the province in 2020. That share jumps to a little under half (43.3%) of homes completed after 2016. The provincial average is almost on par with Vancouver.

Investors own the highest share of total housing stock in smaller cities in BC. Fort St. John (37.1%), Squamish (35.8%), and Dawson Creek (28.0%) have the largest share of total stock owned by non-occupants. Unfortunately, this data set doesn’t go back to 2015, but it would be interesting to see if the non-resident tax influenced this issue.

BC Residential Real Estate Owned By Investors

The share of BC’s non-owner occupied housing stock by city, and grouped by the date the home was completed. New construction are homes completed after 2016, while total is the total housing stock.

Source: Statistics Canada; Better Dwelling.

Speaking of new supply problems in those cities, two led for recent builds owned by investors. The highest share is in Fort St. John, where investors own 37.1% of housing, which jumps to 78.2% of recent completions as of 2020. Squamish follows, rising from 35.8% of the total stock to 54.5% of recent completions. Prince Rupert is in third with 19.5% of total stock being investor owned, jumping to 50% for recent supply. The last one is a fairly sharp climb. Do they even market locally anymore?

Investors Own Half of Nova Scotia’s New Homes, and Just Over A Third of New Brunswick

Atlantic Canada real estate is quickly becoming home to a robust rentier class. In Nova Scotia, investors owned 25.5% of total housing stock in 2020 but 48.7% of recently completed homes. New Brunswick has seen a similar trend where 17.2% of total housing is investor-owned, representing 41.0% of recent completions. Unfortunately, there’s no provincial aggregate for Newfoundland. Though, it would be surprising to see the province as an outlier.

Atlantic Canada Residential Real Estate Owned By Investors

The share of Atlantic Canada’s non-owner occupied housing stock by city, and grouped by the date the home was completed. New construction are homes completed after 2016, while total is the total housing stock.

Source: Statistics Canada; Better Dwelling.

Not a lot of cities across the Atlantic provinces, so let’s go over the big cities and how new supply is faring. In Halifax, nearly 1 in 5 (18.4%) homes are owned by investors, with investors owning 37.1% of recent completions. Moncton goes from 13.5% of total housing stock to 37.1% of recent home completions. St. John’s real estate skews a little higher for total supply at 23.5% investor-owned, but “just” 28.0% of recent completions with investor ownership. 

Investor ownership by itself isn’t a good or bad thing, it is what it is. Why investors are purchasing can be an issue, though. The Bank of Canada (BoC) recently highlighted real estate investors as a risk to the economy. They believe investors are driving up home prices based strictly on the expectation home prices will always rise. When this occurs, the market can become more vulnerable to an economic shock. It’s especially problematic if the investors are older and closer to retirement.

During periods of abrupt economic shock, investors can also amplify turmoil. Investors tend to flee the ship during a downturn, unlike an end-user who rides out most negative shocks. It’s a lesson that should have been one of the most important from the US housing bubble. Even high-income investors with solid credit scores turn into a more significant risk than poor homeowners.

17 Comments

COMMENT POLICY:
We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • yak 3 months ago

    and the beat goes on!

  • RT 3 months ago

    Now that residential real estate has been financialized and considering how far out valuations are, we may be surprised at how fragile and sensitive Canadian real estate has become.

    A very large number of dwellings are now investor-owned (rather than end-user owned) and they own for two reasons only – expected appreciation and steady fixed cash flow – and both are linked to valuation/price. If an initial price decline occurs and a new trend downward appears imminent, many owners of investor-owned dwellings would be very motivated to sell (and may move quick).

    Pile other potential sellers/holdouts on top of that – retirees or near-retirees looking for top dollar; those who bought too much house in the last few years and worried about being underwater; possible casualties if a recession ensues; etc. – and there could be quite a waterfall of new listings.

    Suddenly, we’ll see that supply was never the issue! It was house hoarding & holding out (caused by policies that produced a ‘never can lose’ market psychology) that lead to ever lower turnover. Turnover is the issue – everyone wants to hold onto the golden goose…until it becomes rotten.

    At the same time, a larger than normal amount of future local end-user demand was pulled forward due to FOMO.

    Eventually, with new listings growing (and actual supply growing at a significant clip), investor demand waning, and local end-user demand diminished by being pulled forward, prices will likely continue to erode. Any interested buyers are likely to ‘stand back’ as prices drop to find their new fair equilibrium that is better supported by fundamentals.

    In all this, a persistent level of consumer inflation will likely impede the usual options of “massive fiscal injections” or “dropping rates to .25%”, especially if the rest of the world is still in okay shape.

    Never before in the history of humankind has a bubble continued indefinitely. This time will be no different. Eventually, these sorts of imbalances can’t be continued and the elastic will snap back. The big question is – when might this happen??

  • vnm 3 months ago

    “Investor ownership by itself isn’t a good or bad thing, it is what it is”

    Sorry, but that’s akin to claiming guns don’t kill people.

    • Marc 3 months ago

      Saying guns kill people is dumb, since countries like Switzerland have some of the highest gun ownership ratios in the world and they’re rarely used in crime.

      Guns, much like investors, are only detrimental to society when paired with a poorly educated populace.

    • Ike 3 months ago

      “Sorry, but that’s akin to claiming guns don’t kill people.”

      Are you serious? People with guns kill people. Guns are inanimate objects. Guns don’t go around killing people

  • expat 3 months ago

    This is fine.

  • PK 3 months ago

    So called housing expert who come on TV without knowing anything should read this article.

  • Pattie 3 months ago

    Do not see Langley, Surrey & White Rock on chart? Why?

  • RM 3 months ago

    Wait… what? … seriously, 1 in 5 homes in Toronto are investor-owned? Wow.

  • Ron Bruce 3 months ago

    When self-serving MPs make more money by influencing real estate deals than looking after residents in their riding, taxpaying citizens are in trouble. It should be noted that in the expensive Riding of Vancouver-Granville the constituency office (aka Real Estate office) is paid by taxpayers.
    https://www.vancouverisawesome.com/opinion/taleeb-noormohamed-real-estate-investments-4266621
    It would appear that making $4.9 million off of these activities is a side hustle and not his primary occupation.

  • Oh Boy 3 months ago

    Lending policies have been slanted for decades in favor of the investor class, The fact the system by design is screwing the average person out of owning a home (a place to live) is no surprise to me; it has just caught up with itself is all.

  • Grace Perez 3 months ago

    Time for the government to re-assess it’s policies again. I read in an article that the government acknowledged that having a house is a basic need and not be treated as an investment opportunity. House for sales are being listed with crazy prices and unbelievably bought at a higher price after bidding wars. This has to stop. It is so frustrating and makes it impossible for families like mine who are dreaming to have their first home.

  • JoeTheTruthsayer 3 months ago

    Stop calling them “Investors”. Call it what it is: It’s gambling. These buyers are Gambling that prices will continue to climb, indefinitely. Period. That is not investing.

    Listen to any real investor like I don’t know.. Warren Buffet perhaps, anyone who actually knows how to invest not gamble, and they will explain what a terrible investment real-estate really is.

  • Me 3 months ago

    Little folk don’t stand a chance buying a home these days, what a sad state of affairs!

  • Andrew 3 months ago

    Short of a ban or >30% tax on investor ownership of new homes, this madness won’t end. But the government simply does not care.

  • As Canada dithers about house investors, Singapore pushes back - Global News Media 3 months ago

    […] southeast Asian city-state announced in December it will slap a 17 per cent tax on Singapore citizens who buy a second property and 25 per cent tax […]

Comments are closed.