Nearly 40 per cent of Toronto condo owners don’t actually live in their properties. Instead, they either rent them out, leave them vacant, or use them as a second home, Statistics Canada finds.
The recent report is part of the Canadian Housing Statistics Program (CHSP), which gives insight into residential property ownership in Canada. Based on private and public data sources, StatsCan determined that 37.9 per cent of condos in Toronto are investor-owned.
While this isn’t quite as high as Vancouver, where 45.7 per cent are owned by investors, its impact on the housing market is still evident. According to John Pasalis, a Toronto housing market analyst and president of Realosophy Realty, condo prices are on the rise as a result of investors.
Pasalis believes the strong demand in Toronto has motivated many condo investors to buy pre-construction, the Globe and Mail reports. After completion, they either rent out the unit or sell it for a higher price.
It’s not surprising that demand for condos is so high. The city’s supply is lacking, and other property types, such as detached homes, are unaffordable for many, especially with the new mortgage stress test rules.
Additionally, come September, the federal government’s First-Time Home Buyers Incentive will limit Torontonians to buying condos due to its price cap, which will likely impact demand yet again.
As of June, the benchmark price for a Toronto condo was $539,500. That’s a 7.5 per cent increase compared to the same month last year, according to the Toronto Real Estate Board.
“Condo prices are still being propped up by factors like high immigration, a strong job market, rising income, low borrowing costs, but we see demand starting to take a hit due to high prices, following a 45 per cent run-up over the past three years,” Shaun Hildebrand, president of Urbanation, told the Financial Post.
But condo prices aren’t the only thing that’s being impacted. Now that more people are viewing housing as an investment, more developers are also catering their properties to them, analyst Pasalis said.
“Five years down the road, do we really need 50,000 micro-condominiums that are renting for $2,000 a month? I think this is the risk when your entire new housing supply is driven by what investors want, rather than what end users want,” he said, according to The Guardian.
Toronto is in dire need of more affordable homes as house prices and rent continues to rise. According to a new RBC report, only one in five families actually makes enough income to afford a home in the city.