The Boomer Dominance in Canada’s Real Estate Market

According to a recent study from Statistics Canada’s (Stat Can) Canadian Housing Statistics Program (CSHP), the majority of real estate investors in Canada are baby boomers, which is a significant trend in investor demographics. This article explores the implications of the boomers’ dominance in the real estate market and the challenges it poses for younger generations in search of affordable housing.

Boomers Hold the Reigns

The study found that a significant proportion of resident real estate investors in Canada are aged 55 or older. The provinces with the highest share of investors were Nova Scotia (66.9%) and New Brunswick (66.1%), closely followed by British Columbia (58.5%), Manitoba (58.1%), and Ontario (57.1%). Boomers accounted for nearly one in three resident-owned investment properties in these provinces.

A Shift in Investment Strategies

Many older homeowners are choosing to retain their existing properties instead of selling them when upgrading to a new home. This strategy involves converting the old property into a rental unit and leveraging its value to finance the purchase of a new home. While this approach has been lucrative for many years, it also exposes households to a single asset class, increasing vulnerability. If a large portion of the economy consists of overleveraged investors, it can pose systemic risks.

Underrepresentation of Younger Investors

Conversely, the study found that younger investors are underrepresented in the real estate market. In Ontario, British Columbia, and Manitoba, investors between the ages of 35 and 54 owned only about one in three resident investor-owned properties (37.8%, 36.5%, and 35.8%, respectively). This share drops even further to less than half of the boomer share in Nova Scotia (29.1%) and New Brunswick (29.5%).

Barriers for Younger Investors

StatCan suggests that time and capital are the primary barriers for younger investors. Saving for a down payment is a lengthy process, and saving for two properties is even more challenging. In expensive markets like British Columbia and Ontario, it is even more difficult for younger investors to enter the market. Surprisingly, even in more affordable provinces like Nova Scotia and New Brunswick, where the barrier to saving a down payment is lower, younger investors are still underrepresented. Cultural and opportunity-based factors may also play a role in this phenomenon.

Impact on home prices and affordability

The demographic makeup of real estate investors has a significant impact on home prices and affordability. Greater investor leverage tends to drive up home prices and intensify competition among buyers. Canada’s largest bank, RBC, has cautioned that investors are displacing first-time homebuyers, exacerbating the affordability crisis. Moreover, the normalization of leveraging existing properties when upgrading restricts the supply of more affordable housing options, making affordable inventory even scarcer. This situation creates a challenging environment for young adults seeking homeownership.

Challenges and the Path Forward

The dominance of boomer investors and the resulting scarcity of affordable inventory are not new problems in Canada’s real estate market. However, the situation is worsening as the market becomes increasingly reliant on future generations paying higher rents without adequate consideration for their ability to earn those rents. It is crucial to address these challenges to ensure a balanced and sustainable real estate market that benefits all Canadians. The prevalence of boomer real estate investors in Canada’s housing market presents challenges for younger generations striving to secure affordable housing. The concentration of wealth in a single asset class and the limited availability of affordable inventory have far-reaching implications.

Source: https://betterdwelling.com/double-or-nothing-most-of-canadas-real-estate-investors-are-boomers-stat-can/