Toronto's Condo Market: Over Half of New Builds Owned by Investors

Recent data from Statistics Canada reveals that a substantial portion of newly constructed condo apartments in Toronto over the past few years have been owned by investors. From 2016 to 2021, investors acquired 37,580 newly built condos in the city, representing a significant 56.7% of the total new builds.

Interestingly, this percentage of investor-owned condos appears to be increasing. When comparing the data from 2016 to 2020 (excluding the most recent year), the share of new condos owned by investors was slightly lower at 55.2%.

In contrast, all other property types in Toronto, such as row houses, semi-detached houses, and single-detached houses, showed smaller yet still notable percentages of investor ownership. For properties built between 2016 and 2021, investors owned 32% of row houses, 23% of semi-detached houses, and 13.6% of single-detached houses.

Statistics Canada defines an investor as a property owner with more than one residential property that is not used as their primary place of residence.

Do you think that almost half of new Toronto condos being owned by investors is a problem? Or will it become a problem?

These trends are not unique to Toronto, as Canada's most expensive city, Vancouver, mirrors a similar pattern. For condo apartments constructed between 2016 and 2021, 47.9% were owned by investors. In addition, nearly a quarter of row houses (23.4%) and semi-detached houses (21.5%) were investor-owned, with 15.3% of new single-detached homes falling into the same category.

Other popular cities in Ontario have also experienced a surge in investor ownership, with Hamilton witnessing 55.5% of condo apartments built between 2016 and 2021 being owned by investors. London reached an astonishing 80.5%, and Kitchener-Cambridge-Waterloo recorded a notable 71.7% of investor-owned condo apartments.

The evolving landscape of investor ownership in these cities will be fascinating to observe, especially when considering the significant increase in interest rates over the past year and a half. These changes have introduced increased risk or financial inaccessibility for some investors.

A report released in May by Urbanation and CIBC Economics shed light on this phenomenon, indicating that over half of Greater Toronto Area investors were facing financial losses on their properties. Newly completed units, in particular, were identified as not generating positive cash flow, as mortgage costs, condo fees, and property taxes outpaced rental income.

To maintain the long-term viability of new condo investments, it is crucial for new condo prices to grow in line with resale prices and rents. However, recent deviations in this trend may make it increasingly challenging for investors to achieve favorable returns. Over the past five years, new condo prices have surged by 58%, nearly double the growth seen in condo resale prices and rents.

These insights shed light on the evolving dynamics of investor ownership in the Canadian real estate market, underscoring the need for careful consideration and strategic planning when entering the condo investment arena.