Bank of Canada real estate study shows investors increasing share of market

B.C. saw a record number of new homes registered for construction in 2021, but data from the Bank of Canada suggests a significant share of them are likely to be purchased by investors.

The Bank of Canada study looked at mortgage and credit bureau data to determine the percentage of homes in the country being purchased by first-time homebuyers, repeat buyers and investors. 

It concluded that investors and repeat buyers make up an increasingly large portion of mortgage-backed home purchases in Canada.

“Home purchases are being driven increasingly by existing homeowners,” the study’s authors write in their conclusion.

“Within this group, investors have seen the largest gain in their share of home purchases during the COVID 19 pandemic.”

Because the study looked at mortgage data, it does not capture homes purchased in cash or by corporations, according to the authors.

The study found first-time buyers made up 47 per cent of the market as of June 1, 2021, down from 53 per cent at the start of 2015.

Meanwhile, the percentage of repeat buyers and investors in the market have both increased. In the study, “repeat buyers” are those who are buying a new home and selling their old one, while “investors” are those who are purchasing a new home and holding onto their old one, often with the goal of renting out one of the properties as a source of income.

Repeat buyers were 33 per cent of the market as of June 2021, up from 30 per cent in January 2015, and investors made up 21 per cent of the market, up from 18 per cent.

During the COVID-19 pandemic, as home sales and prices skyrocketed, purchases by investors grew the most. Investors purchased twice as many homes in June 2021 as they did in June 2020, a 100 per cent increase in the number of purchases.

For repeat buyers, the increase over the same period was 66 per cent, while first time buyers’ purchases grew by 47 per cent.

The Bank of Canada study was published the same week the B.C. government touted a record number of new home registrations in 2021.

“Registered new homes data is collected at the beginning of a project, before building permits are issued, making it a leading indicator of housing activity in B.C.,” the province said in a news release.

The latest numbers from BC Housing show 53,189 new homes were registered in B.C. in 2021. That’s a 67.5 per cent increase from 2020 and the highest yearly total since the provincial housing authority began collecting data on new home registrations in 2002.

The total includes 12,899 purpose-built rentals, a 47.7 per cent increase from the previous year.

“This report shows that we can meet the challenge to increase the supply of desperately needed rental homes for individuals, families and seniors in B.C., if cities partner with us to get building permits issued quickly for these registered units,” said David Eby, B.C.’s Attorney General and Minister Responsible for Housing, in the province’s release.

“The numbers show that together we can respond to the more than 25,000 new people who moved to British Columbia in the last three months looking for homes, and the thousands more who we know are still coming,” Eby added. “We can only succeed in this major challenge if we have committed partners in cities, the federal government, non-profits, First Nations and the private sector to get these registered homes built and open.”

The majority of the newly registered homes are not rentals, however, and the Bank of Canada data suggests a substantial number of them will be bought by investors, as B.C.’s real estate market continues to spiral out of reach of many would-be first-time buyers.

In an interview earlier this month, UBC director of urban economics and real estate Thomas Davidoff told CTV News current conditions benefit people who already own property, rather than those trying to get into the market. 

“If we persist in having an environment with very low interest rates and very high rent growth, then yeah I think it’s going to get harder and harder for people to accumulate down payments and really be able to amortize mortgages over their working life,” Davidoff said. 

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