Homebuilders can’t ignore investors

December 17, 2021



While the mantra in most of the real estate and building industry is that local buyers are the most important customers, data shows that homebuilders and residential developers can’t ignore the investor market.
According to Teranet, 25 per cent of all home purchases in 2021 were made by people who already own a home and are investors.
The Bank of Canada has highlighted this rising segment as a growing concern, likely responsible for helping to drive rapid price growth.
“A sudden influx of investors in the housing market likely contributed to the rapid price increases we saw earlier this year,” said Deputy Governor Paul Beaudry. “In such a case, expectations of future price increases can become self-fulfilling, at least for a while.”
This, in turn, creates added risk within the market, Beaudry added.
Teranet found the share of recent home purchases by “multi-property owners” has risen from the smallest buyer segment just 10 years ago (16 per cent of purchases), to the highest segment today (over 25 per cent.).
Multi-property owners aren’t exclusively investors, as it can include owners of cottages and other vacation homes, as well as parents purchasing property for their children, such as university students.
At the same time, the share of first-time buyers in the market has dipped over the past 10 years, particularly after 2016 following the introduction of the mortgage stress test.
Much of the investment market is comprised of new condominiums. Judging from investor sales in new Metro Vancouver condo projects aimed at the sector, and which have seen blow-out pre-sales this year, condo investors are looking for studio and one-bedroom suites; projects close to rapid transit stations; and developments with few high-maintenance amenities, such as swimming pools. Investors also prefer concrete construction in suburban markets with high home price appreciation and low rental vacancy rates.