Canada’s Boomers went all in on real estate investment, looking to double down on their windfall. That was the takeaway from a new Canadian Housing Statistics Program (CSHP) study looking at investor demographics in 2020. The Statistics Canada (Stat Can) study found that most resident real estate investors are at least 55 years old. Younger investors are underrepresented as a share of the population, bringing a unique problem to the market as older households concentrate into a single-asset, forming a crisis for young adults looking for shelter.
Most of Canada’s Real Estate Investors Are Boomers
Most of the country’s resident investors are 55 or older. Looking at property registry data for five provinces, the largest share of investors were in Nova Scotia (66.9%), and New Brunswick (66.1%). Though the other provinces weren’t too far behind—BC (58.5%), Manitoba (58.1%), and Ontario (57.1%). Boomers held nearly 1 in 3 resident owned investment properties in these provinces.
The share shouldn’t be too surprising if you’ve been paying attention. Prominent mortgage broker Ron Butler previously observed a sharp increase in older homeowners hanging onto their existing property as they upgrade. Rather than selling the old unit, it would turn into a rental unit, leveraging its value to pay for the new home.
The strategy increases household exposure to a single asset class, increasing vulnerability. However, it’s been lucrative for decades, so any calls for risk management would fall on deaf ears. If an investor is over leveraged, they have a problem. If an economy is made up of over leveraged investors, the economy has a problem.
Canada’s Younger Investors Are Underrepresented
On the flip side of that stat, the agency found that younger investors are underrepresented. Those between 35 and 54 years old, owned about 1 in 3 resident investor owned properties in Ontario (37.8%), BC (36.5%), and Manitoba (35.8%). It drops off to less than half the share of Boomers in Nova Scotia (29.1%), and New Brunswick (29.5%).
Time and capital are the reasons, according to Stat Can. Saving a downpayment isn’t a quick process, and saving two is even harder. Especially in pricey markets like BC and Ontario, where you would expect the share of younger investors to be even smaller than more affordable markets. That isn’t the case though.
Young investors made up a smaller share in provinces with smaller barriers to saving a down payment. Buying a home in Nova Scotia or New Brunswick is easier than Ontario or BC, especially back in 2020. However, younger investors are even more underrepresented in the more affordable provinces. The trend isn’t as straightforward as just a longer timeline means more exposure. There has to be a cultural or opportunity-based factor also present.
Canada’s Investor Demographic Has A Big Impact On Price
Demographic makeup can have a significant impact on home prices. Greater leverage translates into higher home prices. More leverage results in higher home prices, as well as greater competition for homes. Canada’s largest bank, RBC, notably warned that investors are replacing first-time buyers.
Normalization of leveraging existing property when upgrading is also problematic. It holds back more affordable units from the market, making affordable inventory more scarce. It’s like pulling up the steps as you climb the property ladder, so no one else can follow. Less inventory, while competing with more investors for the same number of units.
There’s also the single point of failure, and non-productive capital diversion.
All of these problems aren’t new, but they are getting worse. Canada is painting itself into a corner, where it’s dependent on future generations moving here to pay higher and higher rents, with little focus on how they’ll be able to earn those rents.
