Guess How Many People Own Investment Properties.

Wednesday May 31st, 2023

Share

 

With my 20+ years of experience and expertise, I continue to advise and help many clients source, buy, lease and sell investment properties - condos and freehold homes - calculating current investment, expenses, rental income, potential future market value and return on investment. My mantra has always been and always will be: If I wouldn't invest in something, myself, I wouldn't let you do it, either.  

A new survey shows more than one in 10 Canadians own an investment property – and their ranks are expected to grow over the next 5 years.

The online survey just released by Royal LePage shows 11 per cent or about 4.4 million Canadians are investment property owners and at least half plan to add to their housing portfolio in the next 5 years.The report also says an estimated 23%,without an investment property, intend to buy one before 2028.What’s driving this?  Well, the interest in real estate investments is coming from a variety of factors.

There is a lot of focus on rising rents, which investors would:

  1. view as revenue
  2. view as capital appreciation
  3. view,the record levels of immigration as future customers

And this checks a lot of boxes.

As we know, housing affordability has been difficult because of rising mortgage rates that have challenged homeowners and prospective buyers. Though home prices have dipped from their pandemic highs, the rate increases have eaten into buying power and convinced many to stick with the surging rental market. The national average home price was $716,000 in April, down 3.9 per cent from a year earlier but up $103,500 from January, the Canadian Real Estate Association has said. Toronto values have far exceeded the national average.

National rents averaged $2,002, in April, nearly unchanged from March but up 9.6 per cent from a year prior. Toronto’s rents have skyrocketed way beyond this. The rental vacancy rate in Canada was very low but now it’s hyper-low and rents, rising faster than the underlying cost of living, make it more attractive.

On the flip side, though, some owners are worried about the carrying cost of rental properties and how much higher rates may be when they renew their mortgage. We're hoping to see rates come down in 2024 - they're already showing signs of decreasing at some of our financial institutions. As of today, we’re waiting to see if the rates go up, again, on June 7thIncreased lending rates have caused nearly one third of investors to consider selling one or more of their properties. Investors aged 18 to 34 are the most likely to weigh the decision of selling at least one of their investment properties.

Royal LePage’s March survey of 1,003 Canadians who own one or more investment properties found 64 per cent of existing real estate investors in the country own one property and 32 per cent have two or more properties.Single-family detached homes are the most popular type of investment property with 44 per cent of investors owning this type of home, followed by condos at 37 per cent and townhomes at 11 per cent

The report’s biggest takeaway was how enthusiastic young people are in wanting to invest in residential real estate.

Although many young Canadians have yet to even purchase a home, real estate investors between the ages of 18 and 34 are the most likely to have more than one residential property.Forty-four per cent of investors in this age group own two or more investment properties, significantly higher than the 29 per cent of investors between the ages of 35 and 54 who them.  A quarter of investors, age 55 or older, own two or more.

However, Royal LePage found 67 per cent of the youngest investors own their primary residence, compared to 88 per cent and 95 per cent of investors aged 35-54 and 55 or older, respectively.

Young people realize we’ve got a critical housing shortage in this country and we’re welcoming half a million new Canadians a year. It’s estimated that 67% of them will end up in Toronto.   And this puts an upward pressure on home prices. 

NOTE: Royal LePage’s online survey was conducted by research firm Leger, which says no margin of error could be associated with a non-probability sample like the web panel it used.

 

 

Post a comment