Canadian cities have seen up to 90% of new real estate supply snapped up by investors

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Canadian real estate is cornered by investors with excessively cheap credit. Residential real estate ownership data in four regions shows a large share held by investors in 2020. What is most impressive is how quickly this trend must have accelerated. Cities have seen up to 90% of recently completed homes go to investors, far more than normal.

About today’s data

Today we look at the share of investor-owned housing across Canada. When we talk about investors, we mean “non-owner” housing. Statistics Canada (Stat Can) defines this as a house that is “vacant, rented to others, or used as secondary property”. Since we are only looking at towns, no cabins in the woods are likely to be included. Only data from Ontario, British Columbia (BC) and Atlantic Canada are 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 homes (21.0%) in the median city of the four regions is owned by investors. By isolating new construction (built after 2016), this number increases to 1 in 3 (33.7%) purchased by investors. Their ownership of new homes is over-represented. It spins about 60% faster than the general market share.

The share of investor-owned housing is higher in some regions than in others. For example, Bay Roberts, Newfoundland has the highest percentage of investor-owned housing. They hold 49.9% of the total stock and 92.1% of recently completed buildings. For a city where unemployment is 65% higher than the national average, this is not a good setup.

Toronto saw investors buy 39% of recently completed homes

Toronto is Canada’s largest real estate market and investor ownership is skyrocketing. Investors owned 18.4% of the housing stock in 2020, or just under 1 in 5 homes. By isolating recently completed houses (after 2016), investors owned 39.1% of new supply. They are buying at more than double the usual rate. That’s a bigger issue than Teranet’s transfer data showing that investors are the city’s largest buyer segment.

Vancouver saw 44% of its new supply go to investors

Vancouver real estate is showing a similar trend, but with a higher share of investors. Investors owned almost 1 in 4 (23.5%) of the total housing supply in 2020. For recent construction, this share rises to almost half (44.0%) of the supply. It’s easy to see how house prices in Toronto and Vancouver are so skewed. There’s a lot less house price friction when you pass the costs on to someone else

Ontario saw investors buy 1 in 3 new homes

Zooming out, investors own an even higher share of real estate in Ontario than what Toronto has seen. Investors owned 21.6% of the total housing stock in 2020 and 34.7% of homes built after 2016. Again, 1 in 5 homes in Ontario are owned by investors, but they managed to snap up 1 in 3 new homes Investor owners represent a disproportionate share of new owners.

Ontario’s small towns lead in investor-owned housing stock. Wasaga Beach (32.3% of homes), Collingwood (31.4%) and Hawkesbury (30.5%) managed to top the list for the most part. 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.

Investor-owned residential real estate in Ontario

The share of non-owner occupied housing stock in Ontario by city, and grouped by the date the house was completed. New construction is houses completed after 2016, while total is the total housing stock.

Source: Statistics Canada; Better housing.

Besides Hawkesbury, Ontario has a few towns where investors are snapping up new supplies. Elliot Lake has 23.9% of its total homes held by investors, rising 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 is the Kitchener-Cambridge-Waterloo corridor (Kit.-Cam.-Wat.). Investors held 18.8% of total supply in 2020, but 46.6% of recent completions. This is a significant problem for these regions given that it is a large city with a rapidly growing population.

Just under half of new homes completed in British Columbia are owned by investors

British Columbia real estate is even more investor-oriented, which should come as no surprise. Investors owned about 1 in 4 homes (24.5%) in the province in 2020. This share climbs to just under half (43.3%) of homes completed after 2016. The provincial average is almost on par with Vancouver.

Investors hold the largest share of the total housing stock in small towns in British Columbia. Fort St. John (37.1%), Squamish (35.8%) and Dawson Creek (28.0%) have the largest share of total stock owned by non-occupiers. Unfortunately, this dataset does not go back to 2015, but it would be interesting to see if non-resident tax influenced this issue.

Residential real estate in British Columbia owned by investors

The share of British Columbia’s non-owner occupied housing stock by city, and grouped by the date the house was completed. New construction is houses completed after 2016, while total is the total housing stock.

Source: Statistics Canada; Better housing.

Speaking of new supply issues in these cities, two have led to recent investor-owned builds. The highest share is in Fort St. John, where investors own 37.1% of homes, rising to 78.2% of recent completions in 2020. Squamish follows, rising from 35.8% of total stock at 54.5% of recent completions. Prince Rupert is in third place with 19.5% of the total stock held by investors, rising to 50% for the recent offering. The last is a fairly steep climb. Do they even market more locally?

Investors own half of new homes in Nova Scotia and just over a third in New Brunswick

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

Investor-Owned Residential Real Estate in Atlantic Canada

The share of non-owner occupied housing stock in Atlantic Canada by city and grouped by date the house was completed. New construction is houses completed after 2016, while total is the total housing stock.

Source: Statistics Canada; Better housing.

There aren’t many cities in the Atlantic Provinces, so let’s review the major cities and how the new offering is doing. In Halifax, almost 1 in 5 homes (18.4%) are owned by investors, with investors holding 37.1% of recent completions. Moncton goes from 13.5% of the total housing stock to 37.1% of recent home completions. St. John’s real estate is a bit higher for total supply at 23.5% owned by investors, but “only” 28.0% of recent completions with investor ownership.

Investor ownership per se is not a good or bad thing, it is. However, why investors are buying can be a problem. The Bank of Canada (BoC) recently highlighted real estate investors as a risk to the economy. They believe that investors drive up home prices based strictly on the expectation that home prices will always rise. When this happens, the market can become more vulnerable to an economic shock. This is particularly problematic if the investors are older and close to retirement.

During periods of sharp economic shock, investors can also amplify the turbulence. Investors tend to jump ship in downturns, unlike an end user who weathers most negative shocks. This is a lesson that should have been one of the most important of the US housing bubble. Even high-income investors with strong credit ratings pose greater risk than poor homeowners.

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