The buyers of houses and condos in Canada’s red-hot housing market often may own a home, perhaps several. Sales data indicates that there has been a noticeable increase amongst those buying additional properties as investments. In fact, the credit reporting firm Equifax has released information that shows that the real growth in real estate sales is increasingly fuelled by those who currently own 4 or more properties.
During the past 12 months through to June 2021, amongst those buying a house or condo, the number of people who were adding a fourth mortgage or more has surged by 7.7%. to put this in perspective, this percentage was double the increase of purchases made by first-time borrowers, according to data released by Equifax Canada Inc.
Canada’s housing market has been about as hot as any in the world. And while people with more than one home loan account for only about 16% of the mortgage market, purchases by those who are buying more houses or condos for investment purposes has accelerated quickly during he past 12 months. Equifax suggests that the increased purchases by investors has been fueled by rising home prices which has allowed current owners to refinance properties and then use the equity to make another purchase. Very low mortgage rates also helped existing homeowners refinance because low mortgage rates boost a person’s ability to borrow more money.
“There is a population that is taking advantage of the current housing market situation to use it as an investment for their retirement instead of traditional routes,” said Rebecca Oakes, assistant vice president of advanced analytics at Equifax. “There is a definite growth in terms of people with multiple mortgages.”
The last time Canada saw a similar surge in people owning multiple properties was in 2017, the data indicates. At that time, rapidly appreciating home prices in Toronto and Vancouver prompted authorities to crack down by changing lending policies, amid fears of a bubble.
While some of the measures Trudeau promised could help level the playing field between investors and first-time buyers (they might include a new loan program, tax credits, and a reduction in mortgage insurance costs) the measures may not be enough to overcome the advantages held by existing homeowners who have gained a significant amount of equity in their existing real estate holdings.
If you believe in the long term strength of Canada’s housing market and want to learn more about real estate investing, contact me for a consultation.
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