Investment businesses are the top new buyers of U.S. houses, which might hurt normal households.
According to the head of one of Canada’s major real estate businesses, huge investors buying single-family houses to rent them out is “in its infancy.” Advocates believe households can’t compete with billionaire money managers.
As interest rates increase and property values fall in most of North America, hedge funds, private equity companies, and pension managers seek stable assets to balance inflation and turbulent stock markets.
Christopher Alexander, president of ReMax Canada, called the tendency of money managers to rent single-family houses a “new phenomenon” in Canada. Given recent price drops, he thinks the idea might catch on in the U.S.
“The lower you can buy as an investor, the higher the chance of selling high,” Alexander said in an interview.
Analysts predict more cash from huge corporations to enter the Canadian market, stressing supply and affordability for normal individuals. Affordable housing activists say a lack of statistics on the extent of these investments makes it tougher for politicians to respond to the trend. Analysts also say institutional ownership of Canadian property is significantly smaller than in the U.S. and is a minor factor in the fast growth in home values over the previous decade.
The Canadian government lacks precise statistics on significant investors in the property industry. Statistics Canada and the Canadian Mortgage and Housing Corporation (CMHC) can’t identify how many properties investment businesses hold. A spokesman told CBC News that Statistics Canada does not provide statistics on institutional investors’ residential property holdings. A spokesperson for CMHC said that they do “not collect the data” in regards to this same information.
Assessing purchases by institutional investors isn’t a simple task, said ReMax’s Alexander, particularly as these firms often “don’t put all of their purchases in the same name or will register properties under different numbered companies or holding companies.”
“I just don’t know if we are set up to track a new phenomenon,” he said.
The subject of uncertainty in the Canadian real estate market is politically sensitive. Few property businesses remark on investor interest in Canada’s housing market. The Canadian Real Estate Association declined to comment. Major brokerage Royal LePage did too. Century 21 and Keller Williams declined interviews.
Jennifer Barrett, a senior planner at the Toronto-based Canadian Urban Institute, says understanding the extent of institutional investments is the first step in responding to them.
In an interview, she said the question of not knowing, “on itself, is an interesting piece to explore.” “The federal government needs to address the financialization of housing.”
Institutional investment in Canada’s housing market is unclear, although individuals who own more than one property control 29% of homes in B.C., 41% in Nova Scotia, and 31% in Ontario, according to April Statistics Canada data. These owners may be mom-and-pop landlords or bigger investors who register property under one name.
Institutional investors made waves in Canada last year despite a paucity of data. Last year, Toronto-based Core Development Group revealed plans to spend $1 billion buying single-family homes in mid-sized Canadian communities. The corporation wouldn’t comment on its investments.
Blackstone, the world’s largest alternative investment business, launched a real estate office in Toronto in May to extend its $14 billion in Canadian real estate holdings. According to CBC news, a spokesperson at Blackstone said, “We expect to continue to be very active in the Canadian market, particularly in areas like logistics, high quality creative offices, life science offices, studios, and multifamily residential.”
“We continue to have no intention of investing in the single-family housing market in Canada.” According to business statistics, Blackstone owns around 25,000 single-family houses in the U.S.
“Given our ownership levels, we have virtually no ability to impact market rent trends,” Blackstone said. “Rents are going up because there is significantly less supply of housing across the globe than demand for it.”
Equity investors frequently buy with cash, so they’re less affected by increasing interest rates than individuals. Blackstone manages $941 billion USD.
ReMax’s Christopher Alexander thinks a “perfect storm” might slam Canada’s market after 2024 as population growth and supply chain difficulties affect new development plans. Alexander said the strengthening U.S. dollar makes Canadian houses more appealing to overseas investors. He added that they perceive a constrained supply, no meaningful answer via construction, and a healthy climate for long-term appreciation.
“Investors aren’t thinking about raising their families there; it’s much more mathematical and numbers-focused. If you are buying a home to live in, it’s emotional.”