Real estate speculation is a national sport in Canada, but it may have gone over the line. The Statistics Canada (Stat Can) Canadian Housing Statistics Program (CHSP) released data showing the share of newly constructed condos owned by investors in 2021. The data reveals that most units are investor owned, amplifying concerns of financialization and ownership concentration. Both issues lead to inefficient markets that aren’t just difficult for the public, but increase vulnerability in the event of an economic downturn.
Canadian Real Estate Investor Market Share & Commoditization
Canada has seen the rapid financialization of housing, and that can be an issue. “In the context of housing affordability, concerns about financialization and the concentration of ownership in the real estate market have emerged in recent years,” wrote the CHSP, in the accompanying notes with the data.
Financialization is when housing is treated as a commodity to trade, rather than serving a need. Everything is commoditized to some degree, but the deeper the financialization the less connected the asset becomes to its use.
In the case of housing, rather than landlords collecting rental yield, they may start trading the homes as speculative properties detached from any value. That can lead to rents that are no longer connected to incomes, resulting in greater social liabilities. Greater social liabilities tend to produce greater corrections.
Concentration of ownership can also present a concern when it comes to essentials. A greater share of investors that trade based on financialization, the more distorted markets become. When housing is treated as a commodity disconnected from its need, it’s prone to more violent economic corrections. It’s a problem that was prominent during the Golden Age of Colonialism, and it’s popping up again. Once again, the more disconnected the worse the correction.
Most of Canada’s New Condo Supply Is Investor Owned
Most of Canada’s new condos continue to be investor owned, driven by larger provinces. Investors owned most condo units built after 2016 in Ontario (57.3%) and Nova Scotia (58.8%). It wasn’t quite half in BC (49.3%), but it got closer. Most of Canada’s new supply has been delivered in these provinces, meaning it skews ownership across the country.
Investors Own Most of Canada’s New Condo Supply
The share of condos built after 2016 that are owned by investors.
*CA includes the five provinces with data from the CHSP. They will be gradually adding more provinces in the coming months.
Source: Stat Can; Better Dwelling
Only two of the tracked provinces have seen major declines in the share of investor-ownership. New Brunswick saw the share of investor owned new condos drop 18.7% to 31.3% in 2021. Manitoba wasn’t as extreme, but still saw a big 9.9% decline to 39.4% of new condos.
Most housing built after 2016 is investor owned, presenting an ownership concentration issue. The issue becomes even more problematic when you consider this is the share of owners that kept the unit as an investment. Virtually all pre-construction is sold to investors in major markets, distorting them even further.
