Canadian Real Estate Investors Capture A New Record Market Share

Canadian real estate investors may struggle, but their death has been greatly exaggerated. Bank of Canada (BoC) data shows investors represented a record share of home purchases in Q1 2024, according to credit file data. Moral hazard (and a buttload of stimulus) appear to have eased investor concerns and boosted demand from the segment. The limitation of modeling excludes many strategies investors use to purchase, meaning this data significantly underestimates the share of investors. 

Canadian Real Estate Investors Capture A Record Market Share

Canadian real estate investors hit a new record share of the market earlier this year. Household credit data shows they represented 30.4% of home buying transactions in Q1 2024. That’s an increase of 0.6 points from last year, when they set the previous record. Back in Q1 2020, they had already represented over 1 in 5 transactions (22.3%), but that’s since increased to nearly 1 in 3 transactions. Canada has never seen such a large share of housing going to investors. 

Canadian Real Estate Investors Capture A New Record Market Share

Investor share of Canadian home purchases, according to household credit data. In percentage points. 

Source: Bank of Canada; Better Dwelling. 

Note in the above chart the brief decline in rates that caused a 5-point contraction in Q3 2023? It fell due to rising interest rates and falling home prices, making it a harder play for speculators. A couple of things helped that shift, including the government’s response. 

Policymakers across the country are actively trying to encourage investors in the market. The non-resident ban was modified to accommodate investors just 86 days after people celebrated its passing; They’re injecting hundreds of billions into the market, with the CMHC warning this “blurs” the lines between crisis and everyday operation; Expanding credit capacity by granting multi-generational loans to avoid the pressure of lowering prices; and the latest (and my favorite), selling the public on 30-year amortizations for first-time buyers of new homes, before quietly extending it to all buyers including investors.  

We can list measures over the past year all day, but you probably get the point—they really, really want investors. Heck, the head of Canada’s government has even outright said home prices “need” to be high. Investors aren’t just being told the state has their back, but policymakers are putting your money where their mouth is to back that move. It may work out, it may not—but it’s easy to see where the narrative formed. 

Canadian Real Estate Investors Underestimated By The BoC

The limitation of the methodology used by the BoC means the share is likely much higher. When the same methodology was used to say first-time buyers were half the market, we asked for clarification on how they were modeling this data. They explained the model relies on household credit and not land registry data. This shift means first-time buyers are overreported and investors would be underreported. 

First-time buyers in this context are purchasers who don’t have another mortgage. That means those who own their primary residence outright may be considered a first-time buyer. In other words, there’s zero risk of misclassifying a first-time buyer as an investor, but the opposite is likely a regular occurrence.  

Limiting the data set to households excludes a large share of investors. Institutional, corporate, and business loans wouldn’t show up in this methodology. Ditto for private mortgages, increasingly a part of the market, and investors using foreign institutions that don’t report credit in Canada. Then there are cash buyers, which represented roughly 35% of Greater Toronto home sales back when I helped with a money laundering analysis.  

So, yes. Investors hit a record market share at 30% of transactions… if we exclude institutions, companies, corporate borrowers, foreign investors, and cash buyers—popular strategies typically used by investors. That would explain the big cap between the BoC’s data and Statistics Canada (Stat Can).  

Data is starting to emerge to show just how bad of an idea concentrating risk can be. Expensive cities like Toronto are now experiencing irreversible damage as young adults flee and investors are left with cash flow-negative properties. Rising mortgage delinquencies over falling prices also indicate that overleveraged speculators dominate the market, and don’t have an exit.