Analysis of residential real estate investors and investment properties, focusing on Ontario

Hello and welcome to my newsletter where we discuss Real Estate and Mortgage insights and updates. In today’s edition, it’s all about investors and investment properties. Here’s what we’ll cover while analysing Statistics Canada’s recently released report about them:

• Introduction
  • Key Findings 
• Ontario Investors & investment properties – A closer look
  • Investor profile & property types
  • Investor ownership patterns
  • Toronto
• Takeaways for investors and real estate professionals

• Mortgage updates – rates & key upcoming events

Introduction

Earlier this year, Statistics Canada started publishing data and reports specifically on real estate investors. These reports present data on investors and residential properties in the provinces of Nova Scotia, New Brunswick, Ontario, Manitoba, and British Columbia using 2020 data. 

The first of this series, published in Feb of this year, mainly focuses on the share of properties used as investment across the 5 provinces and this is the report that we’ll focus on today. You can read the full report here. 

Some of the key findings of the overall report are:

• The proportion of investors among property owners ranged from 20.2% in Ontario to 31.5% in Nova Scotia (the Nova Scotia figure is high because of the widespread ownership of vacant land in addition to a primary residence).
• Condominium apartments were more commonly used as investments than houses, with Ontario having the highest rate of condominium apartment investment usage.
• Different types of investors were identified, including in-province investors, out-of-province investors, non-resident investors, and business investors.
• Investment properties were more concentrated in the Toronto and Vancouver CMAs, particularly in their core areas.
• Outside of CMAs and CAs, investment properties were often used as secondary residences or recreational properties, and certain areas of Ontario attracted a larger share of out-of-province investors.
• Data from the 2021 Census reveals a declining trend in the proportion of Canadian households owning their homes. 69% of households owned their homes in 2011. It’s down to 66.5% in 2021.

Closer Look at  Ontario 

Investor Profile and property types in Ontario

• In Ontario, the proportion of investors among property owners was 20.2%, which indicates a significant presence of investment properties in the province. This finding suggests that a considerable number of residential properties are being used for purposes other than primary residence.
• When analyzing the types of properties used as investments, condominium apartments stood out in Ontario. They were more commonly utilized as investment properties compared to other property types, such as single-detached houses, semi-detached houses, row houses, and mobile homes. In fact, Ontario had the highest rate of condominium apartments used as investments among the provinces analyzed, reaching 41.9%

Investor Ownership Patterns

• The ownership of houses used as investments in Ontario was mainly attributed to individuals residing in the same province as the property. This indicates that local investors are actively participating in the real estate market and utilizing houses as investment assets.

Toronto CMA

• Within the Census Metropolitan Area (CMA) of Toronto, there is a higher proportion of investment properties in the core census subdivision, the City of Toronto. Approximately 21.7% of houses and condominium apartments in the City of Toronto were used as investments, surpassing the overall rate of 16.3% for the entire Toronto CMA. This higher concentration of investment properties in the core area reflects the market dynamics and demand within the urban centre.

Takeaways for investors & real estate professionals

If you’re a real estate investor – existing or potential, or if you’re a realtor, a real estate lawyer, or even a mortgage broker (I know some of you get these newsletters), here are some of the lessons you can take away from this: 

• Understanding the prevalence of investors: Recognize that a significant portion of property owners in Ontario are investors. This knowledge can inform your strategies when dealing with clients and understanding the dynamics of the market.
• Focus on condominium apartments: Acknowledge the higher rate of investment usage for condominium apartments in Ontario. This can guide your recommendations and expertise when working with clients interested in buying or selling this type of property.
• Consider the diverse investor categories: Take into account the different types of investors, such as in-province, out-of-province, non-resident, and business investors. Understanding their motivations and preferences can help you tailor your services and provide relevant guidance.
• The concentration of investment properties: Be aware of the concentration of investment properties in the Toronto (and Vancouver) CMAs, particularly in their core areas. This knowledge can help you identify potential opportunities and challenges specific to these regions.
• Secondary residences and recreational properties: Recognize that investment properties outside of major urban centres often serve as secondary residences or recreational properties. This insight can be useful when advising clients seeking such properties or when analyzing market trends in specific regions.
• Attractiveness to out-of-province investors: Take note of areas in Ontario that attract a larger share of out-of-province investors. Understanding these preferences and market dynamics can assist you in effectively catering to the needs of this investor segment.

Overall, the information provided here can enhance your understanding of the investor landscape in Ontario and enable you to provide valuable insights and advice to your clients in the real estate industry.

Mortgage Updates – Rates & Key Upcoming events

To wrap up, here are the updates from the mortgages landscape that you should be aware of:

• Rates: Rates have jumped up from my last update earlier this month. For up-to-date rate information, please always check ronmortgages.com/rates
  • Prime rates: My current 5Y fixed rates start from 4.54% while the 3Y fixed rates start from 4.79%
  • Alt rates: Alternate lending rates have stayed flat and still start at 5.79% (3 yr term)
  • Private mortgage rates: Starting from 7.99% (lending fees from 2%)
• Key upcoming events (that can affect interest rates in Canada):
  • Bank of Canada’s upcoming rate announcement on June 7, 2023
  • US Federal Reserve’s rate announcement on June 14, 2023

As always, hope you got some value out of this post. Please reach out if you or anyone you know is looking for a mortgage or a way to access equity from their current homes. See you in the next one!