These days there are all sorts of examples of people in power taking a ‘do as I say, not as I do’ position when it comes to their influence on policy. When it comes to housing it is a little remarkable to note how that applies to housing and members of parliament during what they themselves have described as an affordability crisis. The best example would be Vancouver-Granville Liberal MP Taleeb Noormohammad flipping 41 homes for profit over the course of a few years, all the while towing the line and stating that the cabal he belonged to would be the one to make housing affordability for Canadians a reality.
Now we’ll steer well clear of making the connection between the Federal Liberal party being of the ‘say one thing, do another’ variety, despite the whole truth of that. Or the equally accurate one of promising what people want to hear despite no intention of following through on any of it. That’s the Liberal way in Canada. However, what we’re going to talk about here is the way that it is the investor class – many who come from these same well-heeled backgrounds – are in fact dominating home ownership to rather staggering percentages in some parts of the country.
This is something that should be of interest and concern for people from all walks of life, and including the realtors who would be selling these homes to the investors who own multiple properties in the cities in which they reside – or don’t. Having home prices out of reach for the average buyer is not beneficial on any level, and that applies to the business of real estate too in that a healthy market means more would-be buyers are qualified ones able to buy a home. Our online real estate lead generation system here at Real Estate leads can help realtors who have fewer new clients all the time because of this.
But enough about that, multiple-property owners are a massive influence in a distorted housing market – and that is certainly what we have in Canada at this time. To what extent is it a problem? Read on.
41% of Housing Stock in Some Regions
There is now data from Stats Can showing that multiple-property owners continue to hold between 29 and 41 percent of the housing stock in Ontario, British Columbia, Nova Scotia, and New Brunswick. Nova Scotia is where it is the highest at 41%, and of course the problem is that these multiple property owners are not daunted by stratospheric high prices for homes when they can simply go the HELOC route to afford whatever they may be based on the all the homes they already own and are – besides from their principal residence – being rented out for high rents.
New Brunswick came in at 39%, 31% for Ontario, and 29% for BC. What is also interesting to note is that in Ontario and BC governments and other entities own in the vicinity of 10% of property stock in those provinces too. And of course all of this comes on the heels of the BoC stating in February of 2021 that investors were making around 20% of all home purchases in the country. There is no changing the reality that investing in housing is safer than investing elsewhere, and as regrettable as that is there is no changing it in the short term.
A healthier and less distorted housing market benefits everyone long term, and the federal Government needs to be much more proactive in making it so that home hoarders aren’t able to do as they wish, even if they can afford to do it.
The numbers offer a pre-pandemic window into some of the country’s most heated markets and quantify some of the influence investors have on housing supplies, but are not a complete picture because many provinces and territories were not studied, the data does not break down how many properties are being rented out or used as a cottage and the figures don’t account for the health crisis.
“In the last couple of years, we have seen millennials deciding that real estate is one of the safest investments and they are taking money, not only to buy their first home, but from other investing sources to buy a second home,” she said.
“I have clients that are retired or semi-retired who have a lot of equity in homes they have owned for 30 years, so they are pulling equity out of that property to buy another property as retirement income.”
Over on the East Coast, Jacqui Rostek said her clients who are choosing to own multiple homes are typically wealthy and “not looking to get rich quick.”
They see Nova Scotia’s shrinking vacancy rates and steady need for rental homes as a way to pad their bank accounts, though many are realizing it will take longer to make back the money they spent on another home.
The demographic Rostek noted shifting toward multi-property ownership is in line with Statistics Canada’s data, which shows that the top 10 per cent of owners in those provinces earn more than the bottom 50 per cent combined, with the top 10 per cent of owners in Ontario and British Columbia each earning yearly incomes above $125,000.
But for many, multi-home ownership remains a difficult feat, especially amid inflation and an environment with rising interest rates.
The national average home price climbed by more than 20 per cent since last year to hit a record $816,720 in February, the Canadian Real Estate Association said.
Rostek has seen many multi-property holders, especially those who are small-time, relinquish homes during the COVID-19 pandemic.
“A few people decided to reinvest their capital in other ways, like the stock market, businesses, other holdings, and it was a good time because your investment was worth more,” said the broker with Platinum Group Halifax.
“I also definitely had a fair amount of people who said it was very hard to be a landlord. If you have a few bad experiences as a landlord, you lose money, a tenant damages things, you want out.”
As a result, many are sticking to owning one home and are being joined by an influx of first-time buyers.
Statistics Canada’s data shows between 2018 and 2019 the number of first-time homebuyers increased by 17 per cent in New Brunswick, 9 per cent in Nova Scotia and 6 per cent in British Columbia.
Hermary believes the increase is being driven by people earning more and banking on there being stability in real estate investments.
“People are starting to realize they should have confidence in real estate,” she said.
“We are going to start seeing millennials and people up to the 35 or 40 start looking at investment properties as something they can do to build equity.”
The data’s release comes less than a week after the federal government announced a slew of housing measures, including the end of blind bidding, a two-year ban on foreign buyers and a first-time buyers savings account, meant to make homes more affordable and temporarily less accessible for non-residents.
This report by The Canadian Press was first published April 12, 2022.