Ottawa Real Estate: Winners and Losers for Price Gains in 2022 | CTV News – CTV News Ottawa
“It reaffirmed what we think has been a trend over the past 10 years,” said Mike Moffatt, economist and senior policy director at the Smart Prosperity Institute.
“Especially in Ontario, there is a lack of purpose-built rental housing. For years, investors have bought and rented apartments to students, graduates and those who cannot become first-time buyers because of high house prices.
The study was based on data collected in 2020 and from the 2021 Canadian census, but Moffatt said the trend only accelerated during the COVID-19 pandemic.
A growing population, increased immigration and more international students attending Ontario’s post-secondary institutions have contributed to rising demand.
Also included in the study were Nova Scotia, New Brunswick, Manitoba and British Columbia.
Nova Scotia (31.5 percent) and New Brunswick (29 percent) had the highest share of investor representation. However, a significant percentage of those investors were for multiple properties that were vacant lots.
Less than two percent of Ontario investors owned two or more vacant lots in the province.
Investors owned 23.3 percent of all housing stock in British Columbia and 20.4 percent in Manitoba.
In southwestern Ontario, London followed a similar pattern to Windsor: 14.1 percent of all homeowners were investors and 86.5 percent of condo owners.
By comparison, Toronto’s investor ownership of condos was 36.2 percent.
“Condos are especially popular with investors in cities of between 300,000 and 400,000 residents with large numbers of students at universities and colleges,” Moffatt said.
“It makes apartments a very attractive investment.”
“It has kept rents from rising any higher than they otherwise would have been because then there would have been even more rental shortages,” Moffatt said.
“A growing population had to be housed somewhere.”
Condominiums are particularly attractive to investors classified as businesses.
In Windsor, 45.1 percent of all apartments were owned by businesses, compared to 77.9 percent in London.
“Condos are attractive because they’re the easiest asset class to operate in,” said Rhys Trenhaile, CEO of investment firm Walkerville Capital and broker with The Vanguard Team, which specializes in income-generating real estate.
The added benefits for investors are that as landlords they get a tax write-off, historically enjoy property appreciation, and the tenant pays off their mortgage.
Trenhaile added that Windsor’s high percentage of apartment investor ownership is the result of a combination of factors that have built up over the years.
He said it is common practice for companies, such as electrical and plumbing contractors, who want to be involved in a project, to purchase a few units in a proposed building to help the developer get enough pre-sales to secure financing to start construction. get started. Many choose to hold onto those units as investor income.
Then there are investors drawn to Windsor’s low prices and the chance to generate larger monthly cash flows than they can with apartments in the Greater Toronto Area. With no intention of living in the building, they can wait two years for the units to be completed.
The third factor is that many people who bought a condo as their first home in the past don’t need to take equity out of it if they’re looking for something bigger. They choose to rent out their unit as a new income stream.
“The whole process of building apartments has sparked investor interest,” says Trenhaile, adding that Greater Toronto has been the main source of outside investment in the local market for 20 years.
“Most of us can’t wait two years for our house to be finished.”
He expects demand to only grow and admits to his surprise that only 12.1 percent of all homes locally are owned by investors.
“I think you’re going to see that number go up as people are now allowed to build additional homes on their lots,” Trenhaile said.
Moffatt said the growth in investors owing just over one in five homes in Canada should be concerning. It creates a bottleneck on the real estate ladder that also has consequences for the rental market.
“The concentration of investors on the homeownership side is really problematic for first-time buyers,” Moffatt said.
“There is less movement in the rental market, more competition, too few available units and rents are going up. They end up competing with more investors who are attracted to the condo market because the shortage creates opportunity.
Windsor-Essex County Home Builders’ Association vice president Brent Klundert said speculation in the new home market has also grown locally. Such activity is not currently at the peak of the COVID pandemic, but Klundert feels savvy investors are simply trying to time the bottom of the market before getting back in.
“We saw an influx of out-of-market buyers,” says Klundert.
“Investors would invest in a house or townhouse, betting that the market would grow and that they could sell the contract at a higher price before construction is even complete.”
At one point during construction, homes could increase in value by more than $100,000 from the price initially agreed upon.
Despite the lull in investor activity, Klundert said interest in the region is still seeping through. He notes the positive January figures for new construction contracts.
“Windsor’s prices are still better than the GTAs, so they can get to market more easily,” said Klundert.
“The economic outlook is rosy. I think there is still money to research this area.
“Larger projects are starting fast and furiously because of the supply crisis,” said Klundert. “We need to speed up approvals so we can build more and faster.”
Mark Lalovich, president of the Windsor-Essex County Association of Realtors, said 2023 will be a transition year, but noted that the market is currently lagging compared to 2021 and 2022 in terms of investor interest.
Lalovich said purchases in the area handled by out-of-board agents were 20 out of 265 sales last month, compared to 105 out of 676 in November 2021.
“We know we don’t capture all out-of-town sales as some are handled by agents on our board, but it shows what we’re seeing locally right now,” Lalovich said.
Lalovich added that local developers he has spoken to believe it will be another 12 to 18 months before the market becomes more active and prices begin to rise again.
According to Lalovich, the movement among local homeowners will spill over into the rental market this year, boosting sales in both sectors.
“Investors are quiet because of interest rates and their sensitivity to returns,” Lalovich said.
“Most are sitting on the sidelines waiting to see what happens.
“That helps homeowner residents to enter the market. You have no competing investor interests.
“It’s better for the buyer because you’re in a more relaxed environment.”