Canadian Real Estate Investors Concentrated On Buying Newer, More Affordable Supply

Canada’s national statistics agency made investor-owned homes the subject of their latest data. Statistics Canada (Stat Can) took a dive through tax data to estimate the share of investor-owned homes in 2020. Confirming our observation last year, the data reveals investors scooped most of the new supply in the most affordable segment, at the expense of first-time buyers. 

Canadian Real Estate Investors Are Concentrated In New Supply

Canadian real estate investment is overrepresented in the country’s new supply. In Ontario, investors own just under a quarter (24.0%) of all housing, but nearly a third (32.3%) of homes built after 2016. It’s similar in BC, where investors own a quarter of total supply (25.0%), but nearly 2 in 5 (37.8%) homes that were built after 2016.  

Investor concentration is often dismissed as just an Ontario, and BC issue—but the data shows this isn’t the case. In Nova Scotia, investors owned 35% of total housing supply, but 39% of new supply. Manitoba investors showed a much steeper climb, owning just under a quarter (24.1%) of homes, but 42.1% of those built after 2016. 

Canadian Real Estate Investors Are Scooping Up New Supply

The share of total homes owned by investors vs the share of new supply (2016 or later) owned by investors. 

Source: Statistics Canada; Better Dwelling.

Only one of the five provinces bucked the trend—and did so in a minor way. In New Brunswick, almost a third (33.1%) of homes are investor-owned. It fell to 32% when isolating new construction, meaning new supply was underrepresented. At least compared to the heavy investor ownership that is present elsewhere. 

Canadian Real Estate Investors Are Concentrated In The Most “Affordable” Segment

Canadian real estate investors are also concentrated in the most “affordable” segment—apartments. Ontario investors own over 2 in 5 (41.9%) condo apartments, but 56.4% of condo units made after 2016. In other words, investors own most of the new, more “affordable” supply, in the province. We’re not even discussing the share of condo pre-sales that are flipped without being held for long. 

BC showed a similar trend but with a minor tweak. Investors owned  36.8% of all condo apartments in the province, jumping to 48.9% of new supply. They’re overrepresented, but not the majority—though another 8.7% of homes are owner-occupied investment properties. 

In other provinces looked at, the share is generally less than 1%. They might be owner-occupied, they might not—but the unique combination of  a vacancy and non-resident tax at reporting time is likely to have influenced behavior. 

Canadian Real Estate Investors Focused On Buying The Most Affordable New Supply

The share of total condo apartments owned by investors vs the share of new supply (2016 or later) owned by investors. 

Source: Statistics Canada; Better Dwelling.

Circling back to investor owned condos, the trend tracked for the other three provinces. Nova Scotia condo apartments are 36.6% investor-owned, but they captured most (59.6%) new supply. Ditto in Manitoba, where investors own over a quarter (29.2%) of condos, but nearly half (50.0%) of those built after 2016.  

Even in New Brunswick, condos were too attractive of an investment to pass. Investors owned over 1 in 5 (22.6%) condo apartments, but half (50.0%) of the new supply. Despite bucking the trend for all types of housing, condos still proved attractive to investors. 

Since this is 2020 data, the trend has likely accelerated. Investor activity has trended higher since 2015, but it really got out of control in 2021. The combination of low rates, soaring prices, and moral hazard created made it even more attractive for investors. Combined with the preview Ontario’s land registry data provided, it would be hard not to see this trend accelerating in next year’s update. 

Investors increasing their share of the market drives competition, and thus prices higher. When concentrated in a specific segment like new condo apartments, the impact can be amplified. This doesn’t just send prices soaring, and out of reach for younger end users. It also drives rents higher, by introducing a profit layer between the investor and the end-user. More money spent on shelter means less money for the economy—meaning this isn’t just a problem between first-time buyers and their landlords. It’s going to be a country-wide issue

For those still unsure, RBC made this trend crystal clear last year. The country’s largest bank revealed that first-time buyers are being replaced by investors in their books. At the time, they called it a “sad state of affairs.” Today’s data doesn’t look like they’re the only ones observing this trend. 

12 Comments

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  • RW 1 year ago

    No s***t, Sherlock. Agents & RE lawyers I know were bragging about how much they used to make buying out a whole project and then flipping it to end users.

    Now one I know keeps appearing in the news to discuss how many people can’t close on their units. He neglects to mention he sold them the units.

    • Mortgage Guy 1 year ago

      When the BOC discusses people with variable rates being hurt, they’re also mostly referring to investors. Most people that use their home prefer the security of fixed rates, even on shorter-terms, than variable interest.

      They were chasing the lowest payment to get more leverage, and improve profits—and it didn’t work out. A tragedy worthy of an English Lit class, don’t you agree? LOL

  • Ian Brown 1 year ago

    Regarding your point on BC, full time AirBNBs are being claimed as residences so they don’t get hit with a vacancy tax but they aren’t actually in the unit. Most likely a big skew on the data, to add to issues contributing here.

  • Mortgage Guy 1 year ago

    Just 60% of Toronto? I guess that doesn’t include people who sell their assignment before it registers, especially overseas investors that need to in order to avoid the non-resident tax.

  • Bruno 1 year ago

    Investors are the only ones that can afford to buy at this level, so they aren’t crowding out the no-bid Millennials that wasted their money. Been the same situation for 30+ years when I first moved to Canada. Shut up, and start working.

  • Jamie Preston 1 year ago

    Investors only contribute a small portion to price. The CMHC did a study on this, and only attributed 1-2 points of growth or something miniscule.

    • Ethan Wu 1 year ago

      How did they quanitify the impact of a marginal consumer and its cashflow introduction, and the behavioral impact?

      Answer: They didn’t. The CMHC is hell bent on churning out junk that’s more harmful than good. When they published foreign buying stats, it was complete junk that was proven wrong almost immediately. It was just a data point for the industry to use, since they’re a housing investment bank. They’re a for-profit, and we should stop pretending that elite bankers that head it are really just softies for more housing. It’s about profit.

      • Trader Jim 1 year ago

        Perfectly explained. Worthy of introducing for context—the last head is now at a pension that’s doing a loooot of real estate development.

        Most people miss the projects that pensions conduct because they do it under sub-brands they have a large share in. No one wants phone service from Ontario teachers, but no one cared when they bought Bell. LOL.

    • Chris 1 year ago

      Please be reminded that when the head of CHMC Evan Siddal predicted in 2020 that
      the house prices would fall by 18%, he mysteriously announced his resignation soon after. It definitely ruffled someones feathers. So I would not put much stock in their statistics.

  • Sergey 1 year ago

    Housing is for people. Not for investors. This must be made a law. No investors buying properties. This had gone too far.

    • Moose 1 year ago

      Agreed, this is the only real solution to restore affordability as monetary policy alone won’t cut it. Sadly no politician has the stones to back such legislation as there’s likely too much hush money from industry players to leave on the table.

  • J 1 year ago

    What happens when those who gambled and loses their shirts? HELOC and buy X amount of pre-con and now can’t close. Entire portfolio will be wiped if one was silly enough to over leverage. I hope people who did this is a small percentage because the domino effect can trigger a landslide. Especially if large corporations continue to pass on inflationary pressures to the consumer.

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