Investment firms have become the biggest new buyers of U.S. homes — a trend that could make home ownership more difficult for average families.
The idea of big investors buying single-family homes to rent them out is “just in its infancy” in Canada, but is worth watching, according to the president of one of this country’s largest real estate firms. Some advocacy groups fear families can’t compete against money managers with billions in assets.
Have a question or something to say? Email: ask@cbc.ca or join us live in the comments now.
As interest rates rise and property prices fall across much of North America, deep-pocketed investors such as hedge funds, private equity giants and pension managers are hunting for stable assets to offset inflation and volatile stock markets, according to market observers.
In the first quarter of 2022, investors made up a record 28 per cent of U.S. single-family home sales, according to a report published in June by the Harvard Joint Center for Housing Studies, compared to less than 20 per cent a year earlier.
“Investors bought a larger share of America’s homes than ever before,” noted a separate report from the real estate firm Redfin.
The trend of money managers buying single-family homes to rent out is “a new phenomenon” for the Canadian market, said Christopher Alexander, president of ReMax Canada. He thinks the notion could catch on here as it has south of the border, especially given recent price declines.
“The lower you can buy as an investor, the higher the chance of selling high,” Alexander said in an interview.
“They are well capitalized, they are smart and they have the means to make an impact in the marketplace.”
As middle-class families increasingly struggle to buy homes, analysts say more capital from large firms is expected to enter the Canadian market, further straining supply and affordability for average people. A lack of hard data on the scale of these investments makes it harder for policymakers to respond to the emerging trend, affordable housing advocates said.
Lack of Canadian data
The scale of current institutional ownership over Canadian housing is unclear, but analysts believe it’s far lower than in the U.S. and generally a minor cause of the rapid rise in home prices this country has seen over the last decade.
The Canadian government does not have clear data on the footprint of large investors in the domestic housing market. Neither Statistics Canada nor the Canadian Mortgage Housing Corporation (CMHC), federal agencies which track the sector, could say how many homes are owned by investment firms.
WATCH | Soaring rents price out some Canadians:
Soaring rents price out some Canadians
19 days ago
Duration 2:01
Some Canadians are finding themselves increasingly priced out as the cost of rent soars across the country.
“For the moment, Statistics Canada does not publish information on institutional investors, and the type of residential properties they own,” a spokesperson for the government organization told CBC News via email.
“CMHC does not collect the data that you are looking for,” a spokesperson echoed.
Nailing down purchases by institutional investors isn’t an easy task, said ReMax’s Alexander, especially as these firms often “don’t put all of their purchases in the same name or will register properties to different numbered companies or holding companies.”
“I just don’t know if we are set up to track a new phenomenon,” he said.
‘The question of not knowing’
The subject is politically sensitive. Few other major property firms would comment on investor interest in the Canadian housing market.
The Canadian Real Estate Association, the trade body representing brokers, declined to comment. So did Royal LePage, a major brokerage. Two other property agencies, Century 21 and Keller Williams, didn’t respond to interview requests.
Christopher Alexander, president of ReMax Canada, said he isn’t sure whether the government is currently set up to track the trend in Canada. (Chad Hipolito/The Canadian Press)
Getting a clear picture of the scale of institutional investments is the first step for determining how to respond to them, said Jennifer Barrett, a senior planner with the Canadian Urban Institute, a Toronto-based non-profit.
“I think the question of not knowing, onto itself, is an interesting piece to explore,” she said in an interview. “The federal government needs to address the financialization of housing.”
While the extent of institutional investment in Canada’s housing market isn’t clear, individuals who own more than one property hold 29 per cent of residences in B.C., 41 per cent in Nova Scotia and 31 per cent in Ontario, according to Statistics Canada figures released in April. These owners could be mom-and-pop landlords who own a couple of rental properties or larger investors who register homes under a single name.
Industry denies pushing up prices
Despite the lack of hard data, institutional investors recently made headlines in Canada.
Core Development Group, a Toronto-based real estate firm, drew anger last year when it announced plans to spend $1 billion buying single family homes in mid-sized Canadian cities. The company didn’t respond to requests for comment on the state of its investments.
WATCH | Average home prices begin to dip across Canada:
Average home prices begin to dip across Canada
7 days ago
Duration 1:59
As the real estate market begins to cool, some home sellers are getting less than they hoped for. The shift is even being felt in Canada’s priciest cities.
Blackstone, which describes itself as the world’s largest alternative investment firm, with billions spent on single-family U.S. homes, opened a real estate office in Toronto in May to expand on its $14 billion in Canadian real estate assets.
“We expect to continue to be very active in the Canadian market, particularly in areas like logistics, high quality creative offices and life science offices, studios and multifamily residential,” a spokesperson for the company told CBC News via email.
“We continue to have no intention of investing in the single-family housing market in Canada.”
Blackstone owns approximately 0.02 per cent of single-family homes in the U.S., according to company data, accounting for roughly 25,000 units.
“Given our ownership levels, we have virtually no ability to impact market rent trends,” Blackstone said in March in an online question and answer session responding to criticism. “Rents are going up because there is significantly less supply of housing across the globe than demand for it.”
U.S. realities
Private equity investors in the U.S. started buying up single-family homes following the 2008 subprime mortgage crisis and ensuing recession, said Barrett of the Canadian Urban Institute. But the trend did not catch on to nearly the same degree in Canada.
Since then, corporate landlords have acquired an estimated 350,000 homes, according to testimony heard by the U.S. House financial services committee on June 28 probing affordability challenges and private equity.
In the U.S., institutional investors now own an estimated 350,000 houses, according to congressional testimony, and the share is increasing. (Graeme Roy/The Canadian Press)
By 2030, investors could control as much as 40 per cent of the U.S. rental home market, according to data cited by PERE, an industry journal.
Aside from fears about deep-pocketed financiers out-competing regular people to buy homes, tenants renting from big investors have faced a slew of problems, said Madeline Bankson, a researcher with the Private Equity Stakeholder Project, a U.S.-based advocacy group.
Poor maintenance, broken air conditioners in the sweltering U.S. south, a lack of garbage collection, mould, exorbitant charges for late payments, and no one to respond when things break, are among the problems tenants in houses owned by large investors have reported to advocates.
“The model is: increase revenues, decrease costs,” Bankson said.
Fears of a ‘perfect storm’
Unlike average people who usually require a mortgage to purchase a home, equity investors typically buy with cash, meaning they are more insulated from rising interest rates than individuals. Blackstone, for instance, boasts $941 billion US under management.
ReMax’s Christopher Alexander, who closely tracks Canada’s market, worries a “perfect storm” could be on the horizon post-2024, as population growth continues and supply chain challenges hit plans for new construction.
Aside from fears investment firms can out-competing regular people to buy homes, tenants renting from big investors have faced a slew of problems, according to one housing researcher. (Evan Mitsui/CBC)
The rising U.S. dollar compared to Canada’s currency also makes Canadian housing more attractive for foreign equity investors, Alexander said.
“They see we have tight supply and no real solution to it through building; we can’t keep pace, and they see a good climate for long-term appreciation,” he said.
“Investors aren’t thinking about raising their families there; it’s much more mathematical and numbers focused. If you are buying a home to live in, it’s emotional.”
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
