A profile of residential real estate investors in 2020

Overview

This article
presents a detailed profile of residential real estate investors in the
provinces of Nova Scotia, New Brunswick, Ontario, Manitoba and British Columbia
in 2020. It documents the demographic characteristics of investors, including
age, sex and immigration status. It also looks at the geographic distribution
of investors in certain provinces. The article is the second in a series on
residential real estate investors produced by the Canadian Housing Statistics
Program.

Key findings

• 
  Among the provinces studied, Nova Scotia, New
  Brunswick and British Columbia had the highest share of out-of-province
  investors and non-resident investors.




• The share of in-province investors owning three or more properties in the housing stock ranged from 1.6% of all owners in New Brunswick to 2.9% in Ontario.




• Established immigrants—those who landed before 2010—comprised a higher share of investors than their share of the provincial populations.




• 
  Residents aged 55 and older represented a higher
  proportion of investors than their share of the provincial populations.




• 
  Women represented around half of all resident investors in the five provinces but were underrepresented among in-province investors with three or more properties in the housing stock, relative to their share of the provincial populations.

Introduction

In recent years, there has been growing
concern about the role of residential real estate investors in Canada
(Younglai, 2021a and b; Bank of Canada, 2021; Khan and Xu, 2022; Pasalis, 2022;
House of Commons, 2022). While investors can provide needed rental stock, they
have also been found to exacerbate house price volatility and can limit housing
market access for first-time homebuyers (Haughwout et al., 2011; Allen et al.,
2018; Caranci et al., 2022). As house prices increased sharply during the
pandemic, several reports indicated that investors had begun to play a more
prominent role in the Canadian housing market (Khan and Xu, 2022; Teranet,
2022). The Canadian Housing Statistics Program (CHSP), using comprehensive
administrative data, contributes to an understanding of that role in a series
of publications and data releases on the topic.

This article follows an initial
article released earlier this year that
mainly focused on the share of properties used as an investment across five
provinces – Nova Scotia, New Brunswick, Ontario, Manitoba and British Columbia
– by property type and by investor type (Fontaine and Gordon, 2023). In the present
article, the CHSP provides additional information about the profile of
investors in those five provinces. Specifically, it examines the demographic
characteristics of investors and distinguishes between different types of
investors to help clarify the nature of their role in housing markets.

What is an investor?

The analysis
below classifies owners into one of three categories: investors,
investor-occupants and non-investors.

An investor is an owner of at least one residential
property that is not used as their primary place of residence. This category
includes

• A business or government that owns at least one
  residential property, excluding Canadian non-profit organizations. Given the
  predominance of businesses in this category, they will simply be referred to as
  a “business investor” in what follows.




• A person who is not a current resident of Canada
  and is a residential property owner, referred to as a “non-resident investor”.




• A person who lives outside the province where
  they own residential property, referred to as an “out-of-province investor” in
  the province of the non-principal residence.




• A person who lives in the province and owns two
  or more residential properties, or owns a property with multiple residential
  units and does not occupy that property. These persons will be referred to as
  “in-province investors”.

By contrast, investor-occupants
own a single property with multiple residential units, one of which is their
primary place of residence. For example, this category includes owners of a
house with a laneway unit or basement suite and owners of a duplex who live in
one of the units.

Lastly, non-investors are owners who are not an
investor or an investor-occupant. This category primarily includes owners of a
single property that does not have multiple residential units who live in the
province where their property is located. Canadian non-profit businesses are
also included in this category.

Looking at different investor types
across provinces

The share of the different investor types
set out above can be compared by province (Chart 1). This comparison is
useful because different types of investors may have distinct purposes for
owning investment properties and
may thus have distinct demographic profiles and differing impacts on the
housing market.

Among these investor types, one important
distinction is between in-province investors with multiple properties that are
part of the housing stock (i.e., properties that are not vacant land) and those
who own one property in the housing stock and only parcels of vacant land in
addition. This vacant land is often adjoined to the property of the primary
residence and is used as an extension of that property. In Chart 1, these
types of investors, along with those who own two or more properties of vacant
land only, are called “in-province investors—vacant land.”^Note 

We find that investors with this profile were
similar to non-investors in terms of average income, assessed value of
residential property holdings and the relative absence of rental income. When
they are excluded, most provinces had similar rates of in-province investors
among all owners (between 12.6% in Manitoba and 13.6% in Ontario), with a lower
rate in New Brunswick (10.0%).

The rate of out-of-province investors in Ontario (0.5%) and Manitoba (1.4%) was relatively lower than in British Columbia (2.7%), New Brunswick (3.0%) and Nova Scotia (3.8%). In British Columbia, higher rates of out-of-province investors were found in areas along the southern portion of the British Columbia-Alberta border. For example, in the regional municipality of Invermere, 40.9% of owners were out-of-province investors, and this rate reached 69.2% in Radium Hot Springs.

In New Brunswick and Nova Scotia, a
regional analysis reveals that a high proportion of properties owned by
out-of-province investors were in areas near the Atlantic coast or provincial
boundaries.

The rate of investor-occupants was highest
in British Columbia (9.6%) and significantly lower in the other provinces. This
phenomenon is examined in greater detail in the final section of the article.
Other CHSP releases have examined variations in the rates of non-resident
ownership and business
ownership; thus, these investor types are not detailed here.

Differentiating among in-province
investors

It is also possible to further
differentiate the category of in-province investors (those who reside in the
province where they own investment properties). This can be done based on the
number of properties they owned and the location of their secondary properties
(Chart 2). In this section, “in-province investors – vacant land” are
excluded, and thus all properties are assumed to be in the housing stock. 

One distinct profile among in-province
investors are those who own a single additional property in a different region
than where their principal residence is located.^Note 
In many cases, these may be recreational property owners, rather than landlords
who often own multiple properties in the same region.^Note  An analysis
of declared rental income among these different in-province investor types
found that investors with a potential recreational property profile (two
properties in different regions) were around half as likely to declare rental
income in their tax family than those with a potential landlord profile (two
properties in the same region or three or more properties). In British
Columbia, for example, 61.8% of the latter type declared rental income in their
tax family, compared with 35.4% of the former type. In Ontario, the figures
were 61.5% and 25.7%, respectively.^Note   

In-province investors can also be
distinguished by whether they have only one additional property or whether they
own three or more properties (Chart 2). Similar rates of these
larger-scale in-province investors were found across provinces, ranging from 1.6%
of all owners in New Brunswick to 2.9% in Ontario.

Investor incomes

Out-of-province investors had the highest average incomes in all five provinces (Table 1) compared with other types of investors. Among in-province investors, those with three or more residential properties had the highest incomes across all provinces, followed by those with only a single additional property in a different region—a situation consistent with holding a potential recreational property. In-province investors with two properties in the same region had the next highest incomes, while those with vacant land had the lowest incomes among all resident-investor types. In most provinces, investors who only owned vacant land in addition to their principal residence had average incomes similar to those of non-investors and investor-occupants.



Established
immigrants are investors at higher rates than Canadian-born residents

Previous releases from the CHSP have found
that the share of homeowners who are immigrants in each province corresponds
closely to the share of immigrants in the overall provincial population. In
other words, immigrants appear to be able to access homeownership at a similar
rate to that of Canadian-born residents. Among individual resident investors, however,
immigrants were underrepresented, relative to their share of the provincial
population, in Nova Scotia, New Brunswick and Manitoba (Chart 3).^Note  This is mostly
due to fewer recent immigrants (those who landed in Canada since 2010) being
investors.^Note 
Established immigrants, on the other hand, made up a
higher proportion of investors than their share of the population in these
provinces. In Ontario and British Columbia, both immigrants in general and
established immigrants were overrepresented among investors, relative to their
share of the provincial population.

The assessed value of the property holdings
of immigrant investors tended to be higher than that of Canadian-born investors
in all five provinces.^Note 
For example, the average assessed value of immigrant investors’ total property
holdings was $2,200,000 in British Columbia, compared with $1,610,000 for
Canadian-born investors. The property holdings in Ontario were on average $1,290,000
for immigrant investors and $890,000 for Canadian-born investors. In the other
provinces, the differences in the average value of the total property holdings
between immigrant and Canadian-born investors were smaller in absolute terms.
In each province, though, most of this difference was explained by the fact
that immigrant investors were more likely to own a primary residence in a
larger census metropolitan area (CMA), where assessment values tend to be
higher than in other parts of the respective provinces. When looking at
investors with primary residences in the same census subdivisions (CSDs), the
difference in average assessed value between immigrant and Canadian-born
investors was smaller.

In Ontario, Manitoba and British Columbia,
the average income of immigrant investors was lower than that of Canadian-born
investors. The disparity in incomes was most pronounced in British Columbia and
Ontario. In British Columbia, Canadian-born investors had an average individual
income of $105,000, whereas immigrant investors had an average individual income
of $80,000. In Ontario, the average individual income was $80,000 for immigrant
investors and $100,000 for Canadian-born investors. In Nova Scotia, the average
income of immigrant investors ($75,000) was higher than Canadian-born investors
($65,000). This pattern was also found in New Brunswick, where the average
income of immigrant investors ($65,000) was higher than Canadian-born investors
($60,000).

The majority of investors are 55 and
older

Residents aged 55 years and older were overrepresented among homeowners relative to their share of the population. This is consistent with the idea that purchasing a home often requires a lengthy period of saving and the higher incomes usually associated with longer experience in the labour market. For similar reasons, residents 55 and older were even more overrepresented among investors (Chart 4). In all five provinces, they constituted the majority of resident investors—from 57.1% in Ontario to 66.9% in Nova Scotia—despite being a minority of the adult population in each province, from 39.8% in Manitoba to 48.3% in New Brunswick.^Note 

Conversely, Canadians younger than 35 were
significantly underrepresented among investors relative to their share of the
adult population (Chart 5). This underrepresentation among investors was
even more pronounced than their underrepresentation among homeowners and likely
occurred for similar reasons: fewer income-earning years make it more difficult
to accumulate the financial capital required for homeownership and, especially,
real estate investment.

Men are overrepresented among investors
with three or more properties

Women and men constituted a similar

proportion of investors in the five provinces. Among resident investors, the proportion
of investors who are male ranged from 50.2% in British Columbia to 56.2% in New
Brunswick.^Note 
This indicates that there was a limited difference between men and women in the
propensity to engage in real estate investment. It is notable, though, that men
were overrepresented among investors with three or more properties in the housing stock.
This may suggest a more significant difference between men and women in the
propensity to become larger-scale investors.

Despite this, the average assessed value of
investors’ real estate holdings was similar between men and women in all five
provinces.

Consistent with the pattern among all
homeowners, the average income of female investors was significantly less than
that of male investors. This disparity was the largest in British Columbia and
Ontario. In British Columbia, the average income for male investors was $125,000
compared with $70,000 for female investors. In Ontario, those same figures were
$115,000 and $75,000, respectively. These statistics align with previous
CHSP findings for real estate buyers in Nova Scotia, New Brunswick and
British Columbia that showed that female buyers had lower incomes than male
buyers, but purchased homes with similar prices.^Note 

There is a significant presence of
investor-occupants in urban British Columbia

In some expensive urban markets,
densification has produced a high number of properties with multiple
residential units, such as rental apartment buildings and condominium apartment
towers. While densification can take the form of large buildings, it can also
emerge through more incremental forms of density, such as single-detached
houses with secondary suites or laneway units, duplexes, or triplexes. This
latter form of density can produce high rates of investor-occupants (people who
own a single property with multiple residential units and live in one of the
units).

CHSP data show that this phenomenon is
especially prominent in urban British Columbia.^Note  In the CMA
of Vancouver, 12.5% of owners were investor-occupants. In the core CSD, the
City of Vancouver, this proportion was 15.9%. This may be attributable to
municipal efforts in the City of Vancouver to promote incremental density, such
as laneway
homes, secondary suites and duplexes. The
share of investor-occupants among all owners was also higher than the
provincial average in the CMA of Victoria, at 12.2%. In the Victoria CMA, the
rate of investor-occupants was highest in the CSDs of Saanich (13.3%), Colwood
(14.6%) and Langford (16.5%). 

As noted above, investor-occupants had
average incomes that were similar to those of non-investors, but lower than
investor incomes, in the four CMAs of British Columbia: Abbotsford–Mission, Kelowna, Vancouver and Victoria.
For instance, in the Vancouver CMA, the average income for investor-occupants
was $65,000, compared with $65,000 for non-investors and $100,000 for
in-province investors.

Despite this, the average assessed value of
the properties owned by investor-occupants was typically higher than that for
non-investors in British Columbia. In the CMA of Vancouver, the properties of
investor-occupants had an average assessed value 34.7% higher than the
properties of non-investors, while in Victoria they were 6.0% higher.

Note to readers

The CHSP is an innovative data project that
leverages data sources and transforms them into new and timely indicators on
Canadian housing.

The data in this study are compiled from
the CHSP for the 2020 reference year. Complete information about the reference
years of the property stock, by province and territory, is available here.

In the calculation of the rate of different
investor types by CSD, all owners of residential property in each respective
CSD are included.

Homeowners for the 2020 reference
year are linked to the tax data from the T1 Family File (T1FF) for the 2019
tax year. Data in the T1FF include all individuals who filed a T1
Income Tax Return, combined with other administrative files from the
Canada Revenue Agency.

Definitions

An investor is defined as an owner of at least one
residential property that is not used as their primary place of residence,
excluding Canadian non-profit organizations. A person who owns a single
property in the province where they reside is not considered an investor unless
they own a property with multiple residential units. This category excludes
investor-occupants.

An investor-occupant owns a single property with
multiple residential units and occupies that property.

A non-investor is an owner who is not an investor or
an investor-occupant. An owner of a single property who lives in the property
is included in this category unless they own a property with multiple
residential units.

A person is considered a non-resident if their
primary dwelling is outside the economic territory of Canada.

Housing stock refers to all residential properties,
excluding vacant land.

References

Allen, M.T., Rutherford, J., Rutherford, R., Yavas, A.
(2018). Impact of Investors in Distressed Housing Markets. The Journal of
Real Estate Finance and Economics. 56. 622-652.

Bank of
Canada (2021). Financial System Review, 2021. Bank of Canada. 

Caranci, B.,
Fong, F., Gebreselassie, M. (2022). Is
housing perpetuating a wealth divide in Canada? TD Economics.

Fontaine, J., Gordon,
J. (2023). Residential real estate investors and investment properties in 2020.
Canadian Housing Statistics Program: Statistics Canada.

Gellatly, G.,
Morissette, R. (2019). Immigrant ownership of residential properties in Toronto
and Vancouver. Canadian Housing Statistics Program: Statistics Canada.

Gougeon, A., Moussouni,
O. (2021). Residential real estate sales in 2018: Who is purchasing real
estate? Canadian Housing Statistics Program: Statistics Canada.

Haughwout,
A., Lee, D., Tracy, J., and van der Klaauw, W.  (2011). Real estate investors,
the leverage cycle, and the housing market crisis. Staff Reports 514,
Federal Reserve Bank of New York.

House of
Commons (2022). M-71 Affordable Housing Strategy. Private Member Motion.

Khan, M.,
Xu, Y. (2022). Housing demand in Canada: A novel approach to classifying
mortgaged homebuyers. Staff Analytical Note 2022-1, Bank of Canada.

Pasalis, J.
(2022). The Good, the Bad, the Ugly for Toronto Real Estate. Realosophy: Move
Smartly Report.

Teranet. 2022. Market
Insights – The Canadian Source for Housing Information – Q2 2022, (accessed September 12, 2022).

Younglai, R.
(2021a). “Investors account for a fifth of home purchases in Canada. Are they
driving up housing prices in a booming market?” The Globe and Mail, June
22, 2021.

Younglai, R.
(2021b). “Average home costs are up 30% since before the pandemic, a spike CMHC
links to speculative investors.” The Globe and Mail, November 24, 2021.