Investors Are Squeezing The Maritime Housing Market
SAINT JOHN — One in five residential property owners in New Brunswick are investors who own multiple properties. In Nova Scotia, it’s one in four. That’s according to new data from Statistics Canada.
The research looks at 2020 figures from the Canadian Housing Statistics Program (CHSP), specifically, numbers from Nova Scotia, New Brunswick, Ontario, Manitoba, and British Columbia. Residential properties can include houses, condominiums, mobile homes, and other places where people live.
StatsCan notes that condominiums were used as investment properties more often than houses, and that houses used as investments were mostly owned by individuals living in the same province as the property.
Joanie Fontaine, who penned the report, says the agency began working on CHSP in 2018. After a few years of collecting housing data, they recognized the need to look at this specific information. The intention was to create a snapshot of the residential property ownership conditions in the select provinces to use as a baseline to compare to subsequent years.
“There is a concern in our population [about investor ownership], so let’s define it better and look at what they own, and who they are,” Fontaine tells Huddle.
Fontaine says the standout information in Atlantic Canada related to houses, in particular, as opposed to other types of residential properties.
“Nova Scotia was interesting in that they had the highest share of houses used as an investment, with 20.1 percent,” she says. “That was caused primarily by the fact that they had the highest ratio of out-of-province investors, non-resident investors, business investors, and in-province investors.”
She says these investors owned 5 percent of the total stock of houses.
“New Brunswick was the opposite. It was the province with the lowest share,” she says. Investors there only make up 14.4 percent of investors in houses alone.
Hard to capture all the data
Jon Flynn, a real estate broker in southern Ontario, addresses the release in a video on his YouTube channel discussing the Canadian real estate market. Flynn speculates that the findings of how many investors own residential properties are likely lower than the reality on the ground.
“These numbers are actually an underestimate due to the limitations on how investors are classified in this study,” he says.
Pointing to the definition of investor in the study, Flynn notes that if you live in one of the provinces referenced and “you own one property in that same province where you reside [and] declared it as your primary residence when you purchased it and never moved in.. it won’t be included in this data.”
For example, a young person who buys a house as an investment and declares it as their primary residence but continues to live with family. Buyers such as these would not be captured by this study.
You could likely add another five percent to all of the statistics in this study based on this uncaptured data, he argues.
Market impact
Overall, StatsCan found that properties owned by investors can increase the supply of units available for rent, however, they can also contribute to increased competition and fewer available homes for people looking to buy.
The release also looks back at the 2008 financial and housing crisis in the United States. It notes that research there found not only “an increase in the proportion of investors among buyers” in the years leading up to the crisis, but that those investments led to higher house and condo prices.
The release also mentions that the Bank of Canada found “an increase in the proportion of purchases by investors in Canada in the first half of 2021.”
Patrick Francey, the CEO of the Real Estate Investment Network, says recent years have drawn a lot of new investors into residential real estate because of financial conditions.
“What happened in 2020, 2021, 2022 was that people … weren’t getting return on their capital in having it in a bank,” he says. Between the-ultra low mortgage rates and the rapid increase in real estate prices, people saw opportunity.
“Many jumped in without any facts, any education. They are more speculators than they were investors,” he says. “Some would even be as harsh as to call them gamblers.”
That being said, all real estate is local, or regional as the case may be. In Atlantic Canada, there has been significant international and interprovincial population growth during the course of the pandemic.
“Whether it’s immigration from another country, or even a lot of interprovincial migration when people move into a region, they don’t buy, they rent.”
Francey says that between not having a credit rating history (in the case of international immigrants) to just starting a new job and getting your feet under you in a new community, people, no matter where they’ve migrated from, want to understand a community before making the huge commitment to buy a house there.
It’s creating an entirely new demographic of renters, different from what has been seen in Atlantic Canada in the past when populations were dropping.
“If somebody just steps back long enough to look at the other side of the equation, which is if we didn’t have investors, it would just be a different conversation,” he says.
“Why are more investors investing in the East Coast? Ultimately, it’s because they’re fulfilling on demand. There’s a demand that’s happening for rental units. And that demand for rental units is being driven by population growth.”
Affordable housing
Nichola Taylor is the New Brunswick chair of the tenant advocacy group ACORN. Taylor says the influx of investors into the housing market is one of the factors making things more difficult for renters.
“We are seeing investors buying up these properties and then, of course, the rents are going up,” she says. She cites a Canadian Mortgage and Housing Corporation study from January that found a 10-percent increase in rents in New Brunswick from October 2021 to October 2022.
Taylor says investors are buying up the cheaper properties and “renovicting” the existing tenants, only to place the properties back on the rental market at higher prices.
“It’s a vicious cycle,” she says.
“There are there are no affordable apartments anymore if you are on low wages, or on fixed incomes like seniors,” she says. “Investors like these are actually adding fuel to that fire and making it worse, rather than doing anything to ease that off.”
Taylor says stronger renoviction laws protecting the rights of tenants, as well as rent controls and placing limits on how many existing properties companies can buy, are all steps the government can take to help make housing more affordable.
Jill Green, Minister of Service New Brunswick and Minister Responsible for Housing, said in an email exchange with Huddle that she has received the report and is reviewing the information.
“The work being done by Statistics Canada through its Canadian Housing Statistics Program (CHSP) is helpful in increasing our understanding of housing in Canada. I am pleased to see the level of detail being provided for New Brunswick and I am proud to note our role in sharing data with Statistics Canada to undertake this important work.”
“As this program is relatively new, there is limited data available to identify the trends that are occurring in New Brunswick. For example, this release only includes data for 2020. I look forward to seeing this program continue as it will help us better understand the trends that are influencing housing in New Brunswick. “
Alex Graham is a Huddle reporter in Saint John. Send her your feedback and story ideas: [email protected].