Impact of a Shifting Market

Investors Purchased 90% of New Supply

Back in January, 2022, Better Dwelling reported that up to 90% of new real estate supply was purchased by investors due to cheap credit. These are non-owner occupied houses. The information derived from Statistics Canada defines such a purchase “as a home that’s “vacant, rented out to others, or used as a secondary property.”

Investor Ownership: From 1 in 5 to 1 in 3

At the time in Ontario, about 1 in 5 or 20% of stock was investor owned. With new construction, defined as homes built after 2016, and according to the Better Dwelling report, that number rose to 1 in 3 or 33.7%, giving investors a large share of new homeownership.

Niagara Ranks 21 vs. Other Urban Areas

Statistics Canada ranked the St. Catharines/Niagara area as number 21 with regard to the number of homes owned by investors compared to other urban areas in the following manner: 19.6% of the homes owned by investors. With new construction as defined above the total percentage of investor-owned homes rises to 28.1%.

Effect of Rising Rates and Falling Prices

Recently with the increase in mortgage rates, some buyers in the province who purchased prior to the decline in prices but haven’t closed want out of the deal. To date we’ve experienced less than a handful in our brokerage. These are investors who now fear home prices will continue to decline. Yet in large centres like Toronto it has been reported that the number keeps growing. One Toronto lawyer wrote that he’s now specializing in buyers wanting out of their purchase. These would mostly be of two varieties:

1. Short term investors who purchased with the intention of selling fairly quickly and raking in a tidy profit believing that price would continue to rise.
2. Homebuyers are caught in the market turbulence.

What About Homebuyers Caught in the Crossfire

Some homebuyers are caught in the crossfire for various reasons.

• They could have purchased during the buying frenzy confident that their home would sell for a high dollar but hasn’t.
• A buyer’s financing could have failed as they no longer qualify given the higher rates.
• The lender’s appraisal came in shy of the purchase price and they can legally only finance based on the lower of the appraised value or the purchase price.

From Respite to Escalating Turbulence

One local lawyer has reported that “many of the issues have slowed down around the end of June,” for him at the closing end. Yet Betty Talbot, mortgage broker for Centum Omni Mortgage Corp, emphasizes that problems on the mortgage qualifying side seem to be escalating.