Canada faces a wave of investment property purchases

Recently we’ve pointed out that  housing in Canada is quite a popular investment option. Now, we have one more proof that Canadian homeowners are actively buying investment properties.

And the ones who are entering the market at the fastest pace, are those who already have a property, or even four.

From June 2020 to June 2021, the number of Canadians who have added a fourth mortgage (or more) rose sharply by 7.7%, which is more than doubling the gain for first-time borrowers, the latest report by Equifax Canada Inc. shows.

Canada’s real estate market has been almost as hot as any other in the world. Although people with more than one mortgage account for only 16% of the market, the number of purchases by this category of borrowers have grown significantly. The reason lies in the combination of growing housing prices and low mortgage rates, increasing their ability to borrow against one home to buy another one.

“We can see this category benefitting from today’s housing market conditions, as they use it for retirement investment instead of standard options,” – says Rebecca Oakes from Equifax. “The number of borrowers with several mortgages is definitely going up”.

The increase in investor activity has led to affordability concerns, as many potential buyers were pushed out of the market. The tendency is a significant issue for Prime Minister Justin Trudeau, who focused his election campaign on helping first-time buyers.

The last time Canada faced a similar rise in the number of people with multiple mortgages was in 2017. At that moment, sharply growing home prices in Toronto and Vancouver made authorities interfere in attempt to avoid a market bubble.

Although certain measures offered by Trudeau may help in balancing the situation between investors and first-time buyers (e.g. a new loan program, tax credits, lower mortgage insurance costs), they still may be not enough to deal with the benefits today’s homeowners have.