Canadian real estate may have slowed for the average person, but not for flippers. The share of homes purchased and sold in less than 12 months remained largely unchanged in Q2 2024. In fact, the share of sellers that managed to flip their property within a few months is just off record highs. It’s getting harder to see this trend dying too, as rates fall and policymakers incentivize real estate investors to firm home buying demand.
Canadian Real Estate Flippers
Flippers are home buyers who plan to make a profit by reselling within a short period. Sometimes significant renovations are carried out, adding value and improving the quality. At the same time, Canada’s fast-growing home prices have increasingly attracted speculative flippers. Speculators don’t add value, but try to capture gains from rapidly growing home prices—often creating the share of demand needed to push a tight market into one with excess demand.
Since 2023, Canada has defined a flip as buying and selling within a 12-month period. The proceeds of the sale have also been clarified to be business income, not a capital gain that is subject to lower taxation. Exceptions are made for certain life events, but the goal was to reduce speculation by subjecting them to the same taxation as professionals. It hasn’t reduced it by much.
Canadian Real Estate Flippers Saw Little Change In Market Share
Canadian real estate owners flipping after less than 12-months of ownership has barely pulled back. They represented 2.42% of transactions in Q2 2024, falling just 0.16 points. The share was virtually unchanged since a year prior, and just 0.19 points below the record high hit in Q1 2023.
Canadian Real Estate Flippers Retain Market Share Despite Slowdown
The share of Canadian real estate transactions that were sold less than 12 months after purchase.
Source: Bank of Canada; Teranet; National Bank. Better Dwelling.
The above chart highlights just how much low interest rates have played a role in this trend. Prior to 2015, as well as the end of 2019 and start of 2020, the share of flippers was about 25% lower than the two peaks. The first peak was largely related to the 2015 rate cuts and non-resident speculator mini-bubble around Toronto and Vancouver. The latter was sparked by record low rate cuts in 2020, and is slightly more problematic since it was a national trend, with Toronto and Vancouver representing a smaller share of national sales.
Canadian Real Estate Flips Within 6-Months Just Off Record Share
Another surprising detail when it comes to flippers is they’re selling properties a lot faster than most think. The data shows 1.2% of homes were flipped within 6 months of purchase in Q2 2024, representing half of all flips. It’s slightly lower than the record, set only a quarter before.
Share of Canadian Real Estate Sales Flipped In 6 Months Or Less
The share of Canadian real estate transactions that were sold less than 6 months after purchase.
Source: Bank of Canada; Teranet; National Bank. Better Dwelling.
Canadian real estate flippers haven’t been deterred by this market, and they have a good reason. Traditionally falling rates are a sign of a weak economy, a by-product of the eroding financial stability of households and a rising unemployment rate. It doesn’t matter how cheap credit is if an end-user doesn’t have a job. That’s why most price corrections occur while rates are falling, such as the correction in the early 90s and the US in 2008. This is less important as investors replace end-users in the market.
Investors tend to be less sensitive to employment trends. They’re also better capitalized and positioned to disproportionately capture cheap credit. Combine that with policymakers outright stating they’re attempting to preserve the recent frothy gains while granting more investment incentives, and they have a good reason to believe the market will work in their favor. Policymakers may have said the tax changes are to slow down investors, but when combined with incentives, it’s clear that wasn’t the case—they just want a bigger share of the profits.
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