The idea of ​​big investors buying single-family homes to rent them out is “just in its infancy” in Canada, but it’s worth watching, according to the president of one of the country’s biggest real estate companies. Some advocacy groups fear that families can’t compete with money managers with billions in assets. As interest rates rise and property prices fall across much of North America, deep-pocketed investors such as hedge funds, private equity giants and pension managers are looking to stable assets to offset inflation and volatile stock markets, according to observers. purchase. In the first quarter of 2022, investors drove record sales of single-family homes in the U.S., according to a report published in June by the Harvard Joint Center for the Study of Homes, compared with less than 20 percent a year earlier. “Investors bought a larger share of America’s homes than ever before,” notes a separate report from real estate firm Redfin. The trend of money managers buying single-family homes for rent is “a new phenomenon” for the Canadian market, said Christopher Alexander, president of ReMax Canada. He believes the idea could work here, being south of the border, especially given the recent price cuts. “The lower you can buy as an investor, the more likely you are to sell high,” Alexander said in an interview. “They are well capitalized, they are smart and they have the means to influence the market.” As middle-class families increasingly struggle to afford homes, analysts say more capital from big companies is expected to pour into the Canadian market, further straining supply and affordability for average people. The lack of hard data on the scale of these investments makes it harder for policymakers to respond to the emerging trend, affordable housing advocates said.

Lack of Canadian data

The scale of current institutional ownership of Canadian homes is unclear, but analysts believe it is much lower than in the U.S. and is generally a small cause of the rapid growth in home prices this country has seen over the past decade. The Canadian government does not have clear data on the footprint of large investors in the domestic housing market. Neither Statistics Canada nor the Canadian Mortgage Housing Corporation (CMHC), federal agencies that monitor the sector, could say how many homes are owned by investment companies. WATCHES | Rents are rising for some Canadians:

Rising rents are taking their toll on some Canadians

Some Canadians are finding themselves increasingly expensive as the cost of rent soars across the country. “Currently, Statistics Canada does not publish information on institutional investors and the type of residential properties they own,” a spokesperson for the government agency told CBC News via email. “CMHC does not collect the data you are looking for,” echoed a spokesperson. Failing purchases by institutional investors isn’t easy, ReMax’s Alexander said, especially since those companies often “don’t put all their purchases under the same name or will list properties in different numbered companies or holding companies.” “I just don’t know if we’re ready to witness a new phenomenon,” he said.

“The question of not knowing”

The issue is politically sensitive. Few other major real estate companies would comment on investor interest in the Canadian housing market. The Canadian Real Estate Association, the trade body representing realtors, declined to comment. So did Royal LePage, a large brokerage firm. Two other real estate agencies, Century 21 and Keller Williams, did not respond to requests for interviews. Christopher Alexander, president of ReMax Canada, said he’s not sure if the government is currently set up to monitor the trend in Canada. (Cad Hipolito/The Canadian Press) Getting a clear picture of the scale of institutional investment is the first step in determining how to respond to it, said Jennifer Barrett, senior planner at the Canadian Urban Institute, a Toronto-based nonprofit. “I think the issue of not knowing, in itself, is an interesting piece to explore,” she said in an interview. “The federal government must address housing finance.” While the extent of institutional investment in Canada’s housing market is unclear, people who own more than one property own 29 per cent of homes in BC, 41 per cent in Nova Scotia and 31 per cent in Ontario, according to Statistics Canada. in April. These owners could be mom-and-pop owners who own a few rental properties or larger investors who list homes under a single name.

The industry denies any price gouging

Despite the lack of hard data, institutional investors have recently made headlines in Canada. Core Development Group, a Toronto-based real estate company, sparked outrage last year when it announced plans last year to spend $1 billion buying single-family homes in mid-sized Canadian cities. The company did not respond to requests for comment on the status of its investments. WATCHES | Median home prices begin to fall in Canada:

Average home prices are starting to fall in Canada

As the real estate market begins to cool, some home sellers are getting less than they hoped for. The change is being felt even in Canada’s most expensive cities. Blackstone, which bills itself as the world’s largest alternative investment firm with billions spent on U.S. single-family homes, opened a real estate office in Toronto in May to expand its $14 billion in Canadian real estate. “We expect to continue to be very active in the Canadian market, particularly in areas such as logistics, high-end creative and life sciences offices, studios and apartment buildings,” a company spokesperson told CBC News via email. “We continue to have no intention of investing in the single-family housing market in Canada.”
Blackstone owns about 0.02 percent of U.S. single-family homes, according to company data, which equates to about 80,000 units. “Given our ownership levels, we have virtually no ability to influence market rent trends,” Blackstone said in March in an online question-and-answer session responding to the criticism. “Rents are rising because there is significantly less supply of housing around the world than there is demand for it.”

US realities

U.S. private equity investors began buying single-family homes after the 2008 subprime mortgage crisis and subsequent recession, said Barrett of the Canadian Urban Institute. But the trend didn’t catch on nearly as much in Canada. Since then, corporate landlords have acquired about 350,000 homes, according to testimony heard June 28 by the U.S. House Financial Services Committee investigating affordability challenges and private equity. In the US, institutional investors now own about 350,000 homes, according to congressional testimony, and the share is growing. (Graeme Roy/The Canadian Press) By 2030, investors could control as much as 40 percent of the U.S. rental market, according to data cited by PERE, an industry magazine. Beyond fears that deep-pocketed financiers are competing with ordinary people to buy homes, tenants who rent from big investors have faced a number of problems, said Madeline Bankson, a researcher at the Private Equity Stakeholder Project, an advocacy group based in the USA. Poor maintenance, broken air conditioners in the US’s stormy South, lack of garbage collection, mold, exorbitant late payment fees and no one to respond when things break down are among the problems tenants in homes that have been reported to attorneys owned by large investors. . “The model is: increase revenue, decrease cost,” Bankson said.

Fears of a ‘perfect storm’

Unlike average people who typically require a mortgage to buy a home, equity investors typically buy with cash, meaning they are more insulated from rising interest rates than individuals. Blackstone, for example, has US$941 billion under management. ReMax’s Christopher Alexander, who follows the Canadian market closely, worries that a “perfect storm” could be on the horizon after 2024 as population growth continues and supply chain challenges hit plans for new construction. Aside from fears that investment firms can outbid regular people to buy homes, tenants who rent from big investors have faced a number of problems, according to a housing researcher. (Evan Mitsui/CBC) The rise of the U.S. dollar against Canada’s currency also makes Canadian housing more attractive to foreign equity investors, Alexander said. “They see that we have limited supply and there’s no real solution to that through manufacturing; we can’t keep up and they see a good climate for long-term appreciation,” he said. “Investors don’t think about raising their families there; it’s much more mathematical and numbers-focused. If you’re buying a house to live in, it’s emotional.”