Even if you don't pay attention to the real estate market, as long as you go out and drive often, you will find a lot of new apartments under construction. From the federal level to the provinces and cities, the construction of high-density housing is being accelerated, with the aim of providing more housing, especially apartments, because it is relatively the most affordable.
So, will the outlook for first-time buyers improve significantly? However, experts warn that competition for these apartments will be fierce, as the easing of prices means that investors are "ready to move".
Investors, aiming for the second and third homes
John Pasalis, a Toronto real estate agent, said: "Recent sales trends have shown that investors buying new apartments are outnumbering first-time home buyers, owner-occupiers. ”
"A lot of the investors, who are HNWIs who are looking for a second, third or even fourth home, are very common clients of ours, and they are mostly small investors, such as couples. ”
"Since interest rates stabilised, condo investors have grown significantly faster than owner-occupiers," John Pasalis noted. This phenomenon has caused concern in the industry.
For example, Robert Kavcic, senior economist at BMO Capital Markets, said frankly in an interview with Global News: "More than a third of new homes in some markets are bought by investors, and people who really want to enter the real estate market have a wealth of housing options, but find that they still have to face fierce competition." Not only because there are fewer listings, but also because investors don't care much about the price, making it difficult for owner-occupiers to buy a home at a satisfactory price. ”
Last year, 30% of homes in Canada were purchased by investors
A recent TD Bank report reveals a surprising truth: 30% of all homes sold in Canada in 2023 were purchased by investors.
In 2020, only 20% of the homes sold were purchased by investors, so in just over 3 years, the share of investors buying homes has skyrocketed by about 50%.
"That's too high a percentage, and it's having too many adverse effects on the housing market, on first-time buyers, on the Canadian economy," Pasalis admits. ”
"A 7% discount on real owner-occupied properties has pushed up property prices even in times of high interest rates, exacerbating wealth inequality. "This will also affect the rental market and reduce the number of rentable homes." ”
"Although the investment of large institutions and large companies has slowed down significantly in the era of high interest rates, tens of thousands of individual investors and small investors have risen to the challenge and grabbed housing everywhere," Kavcic believes that if this trend continues, even if the construction of more houses is accelerated, it will not alleviate the housing crisis.
Kavcic said that the only thing that is still good is that the construction of buildings dedicated for rental is progressing well, and the federal government has also implemented measures such as GST rebates, and the number of dedicated rental apartments in the six major cities has hit a new high in 2023, which has alleviated the housing shortage to a certain extent.
Housing stock, gradually transformed into "financial assets"
Pasalis believes that the frenzied buying behavior of investors has gradually transformed the "housing stock" that governments at all levels have been waiting for gradually into "financial assets", making housing more unaffordable.
In his view, governments at all levels should take measures not only to restrict the poor proportion of foreign investors, but also to moderate local investors, such as imposing more taxes or restricting the purchase of houses by private real estate trusts.
"The first step is that you need to stop some people from buying, even if it seems inhumane, but investors can't be the fastest-growing share of buyers anyway, let alone outpace first-time buyers," Pasalis said.
"If it's for investment purposes, we need to raise the eligibility for loans and implement stricter loan stress measures, so that many investors will be discouraged first," Pasalis said, "and the land transfer tax and capital gains tax should be raised." ”
Kavcic's point of view is: "Let investors understand that their return on investment is not as big as they think, and the media and institutions should not exaggerate the advantages of Canadian apartment investment and avoid following the trend of investment." ”
But Kavcic also said: "While first-time buyers want the government to discourage investors, let's be honest, as long as it's not one-size-fits-all, there will still be a lot of investment, regardless of interest rates, regardless of whether the economy is booming or not." ”
Investors can "trial and error", but first-time buyers have an urgent need
If you can't understand it, can you move it with emotion?
JPasalis and Kavcic, as well as David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, both said that investors can "trial and error", but first-time buyers have an urgent need.
There is no doubt that the vast majority of investors are wealthier than first-time buyers, and when they also have their eye on an apartment, first-time buyers have less chance of succeeding.
What's even more frustrating is that investors have more leverage and more ways to borrow, such as home mortgages, and can easily get a lot of money to "smash" the next home, while first-time buyers can only compete with their hard-earned down payment.
When the proportion of investors continues to increase, ordinary home buyers can only watch the price of their favorite homes continue to rise, and find themselves farther and farther away from their goals, while investors "laugh" at their second, third, and fourth homes......
The reality is indeed cruel, but as Kavcic said, Canada cannot be one-size-fits-all for investors, and no amount of taxes and restrictions will be painless in the eyes of those who really have the strength to invest, and their investment behavior will continue, because the Canadian market market is "unlimited".