Bank of Canada real estate study shows investors increasing share of market
BC saw a record number of new homes registered for construction in 2021, but Bank of Canada data suggests a significant proportion of these are likely to be bought by investors.
The Bank of Canada study used data from mortgage and credit bureaus to determine the percentage of homes in the country that were purchased by first-time buyers, repeat buyers, and investors.
It concluded that investors and repeat buyers account for an increasing proportion of mortgage-backed home purchases in Canada.
“Home purchases are increasingly being driven by existing owners,” write the authors of the study in their conclusion.
“It is within this group that investors have seen the largest increases in their share of home purchases during the COVID-19 pandemic.”
Because the study looked at mortgage data, the authors said it doesn’t capture homes bought for cash or by businesses.
The study found that first-time buyers accounted for 47 percent of the market as of June 1, 2021, up from 53 percent at the start of 2015.
Meanwhile, both repeat buyers and investors in the market have increased. In the study, “repeat buyers” are those who buy a new home and sell their old one, while “investors” are those who buy a new home and hold on to their old home, often with the goal of renting out one of the properties as a source of income.
Repeat buyers represented 33 percent of the market in June 2021, up from 30 percent in January 2015, and investors represented 21 percent of the market, up from 18 percent.
Investor purchases grew the most during the COVID-19 pandemic, as home sales and prices soared. Investors bought twice as many homes in June 2021 as in June 2020, representing a 100 percent increase in the number of purchases.
Repeat buyers increased 66 percent over the same period, while purchases from first-time buyers increased 47 percent.
The Bank of Canada study was released the same week the BC government announced a record number of new enrollments in 2021.
“Data on registered new construction is collected at the beginning of a project, before building permits are issued, making it a leading indicator of BC housing activity,” the province said in a press release.
The latest figures from BC Housing show that 53,189 new homes were registered in BC in 2021. That’s a 67.5 percent increase from 2020 and the highest annual total since the provincial housing department began collecting data on new housing registrations in 2002.
The total includes 12,899 purpose-built rental apartments, a 47.7 percent increase over the previous year.
“This report demonstrates that when cities work with us to quickly secure building permits for these registered units, we can meet the challenge of increasing the supply of much-needed rental housing for individuals, families and seniors in BC,” said David Eby, BC Attorney General and Minister in Charge of Housing, in the provincial release.
“The numbers show that together we can respond to the more than 25,000 new people who have moved to British Columbia in the last three months in search of homes, and the thousands more we know who are still living coming,” Eby added. “We can only successfully meet this great challenge if we have committed partners in cities, the federal government, nonprofit organizations, First Nations and the private sector to get these Registered Homes built and open.”
However, the majority of newly registered homes are not rentals, and Bank of Canada data suggests a significant number of them will be purchased by investors as BC’s housing market continues to slip out of reach of many would-be newcomer buyers.
In an interview earlier this month, UBC director of urban economics and real estate Thomas Davidoff told CTV News that current conditions are benefiting people who already own properties rather than those trying to enter the market.
“If we continue to have an environment of very low interest rates and very high rental 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 lives,” Davidoff said.