When a big investor sets out to buy 4,000 existing purpose built rental (PBR) units – or to build the equivalent – this has no direct impact on the price of houses/condos.
It may push prices for PBR buildings up pushing cap rates down but it doesn’t drive up home prices. 2/
When a big investor goes out and buys thousands of resale or pre-con units this has a direct impact on home prices.
Not only has the demand for single family homes increased, but the buyer is a billion dollar company 3/
The flip side of course is that this trend is good news for renters.
As more homes move from being owner occupied to tenant occupied, rents fall (or rise very slowly).
In the past ten years avg house prices in the GTA are up 100% vs 30% for avg rents 4/
All that said, here are the two main reasons why I think this is a terrible trend.
Firstly, when we think about the type of rental properties we want, it’s far more desirable to have new rental supply filled by PBR because it’s not only permanent rental supply….5/
it also doesn’t have the negative side effect of inflating single family home prices.
The second, and arguably more important reason is that whether policy makers like it or not, the vast majority of people want to own their own home 6/
Canada is trying to attract and retain the best and brightest people in the world and if those people can’t afford to buy a home of their own, are they going to settle for renting a home for the long term?
Some might, most will not. 7/
I am against trends like this that inflate home prices making it harder and harder for Canadians to buy a family home of their own because it is “a betrayal of this country’s young people” / theglobeandmail.com/opinion/editor…
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In this discussion about the latest trends in the housing market, @greg_bonnell asked if I expect to see a pullback in the market this year...
At this point it's looking unlikely because the market is still very competitive....but 1/
I also mentioned that when thinking about how the housing market might start to cool, it's important to consider whether the trigger will be a fundamental shift in the market vs a behavioural shift in the market...2/
A fundamental shift would be something like a traditional recession where job losses actually lead to lower income and an inability for home owners to service their mortgage payments - leading some to sell.
“We have a very good system of foreign investment creating a lot of new housing in Canada”
Now that our government has said it’s a “good system” to sell off our new housing supply to foreign investors (vs domestic homebuyers), why is this a problem? 1/
First of all, it doesn’t really matter if foreign investors are buying a new home or a resale home – the problem this creates in our housing market is the exact same, it artificially inflates home prices.
Why does this happen? 2/
When a Canadian tries to buy a new house or condominium, their home buying budget is based on their domestic income and their down payment is based on the after tax dollars they have saved.
Can a young household compete against a wealthy foreign investor – of course not! 3/
When it comes to Canada's housing market, it's clear now that it was a deliberate strategy of the @JustinTrudeau Liberal government to put the interests of foreign investors ahead of of Canadians 1/ theglobeandmail.com/news/politics/…
The foreign investors benefited
Our Prime Minister benefited through multiple cash-for-access dinners.
Every home owner would like to see their home's value increase, but the reason for this increase should not be because our federal government decided to sell off our new housing supply to wealthy foreign investors. 3/
But this is largely a product of their own goals to use foreign capital to finance single family home construction which we know inflates house prices.
“We have a very good system of foreign investment creating a lot of new housing in Canada” 2/
He actually admits that our housing market is “a market that’s driven by speculation” and goes on to say that “it gets very very tricky to curb speculation”
It’s actually not tricky, many other countries have done it. Canada has no interest in curbing speculation… Why? 3/