One demographic saw a greater increase in buying activity compared to others during the pandemic
Despite the steady encroachment of investors into the market, first-time homebuyers remain the largest group of home buyers in Canada, according to a new study by the central bank.
This cohort accounted for 50% of home purchases since 2014, while repeat buyers represented 31% and investors the remaining 19%, the BoC said.
However, one demographic saw a greater increase in buying activity compared to the others over the last two years.
“While purchases from all three groups have seen a rapid increase during the COVID‑19 pandemic, this is most pronounced for investors,” the BoC said. “The last time growth in the investor category outstripped that of first-time or repeat homebuyers was in 2017 – during a period of exceptionally strong house price gains in Toronto and surrounding areas.”
On an annual basis, the number of investor purchases went up by 99.39% in 2021, compared to the 66.11% increase in repeat purchases and the 46.94% upswing in first-time purchases, the central bank said.
“Currently, investors account for just over one-fifth of home purchases in Canada. Repeat homebuyers have also seen their share of activity increase slightly over time,” the BoC said. “In contrast, the share of purchases by first-time homebuyers has declined since 2015, reaching a new low in 2021; in the same six-year period, home prices have risen much faster than disposable income.”
The trend holds troubling implications for the market, the BoC said.
“The increased presence of investors in the housing market has contributed to strong demand and may reflect a belief that house prices will continue to rise in value,” the BoC said. “Investors’ demand for housing may also be more sensitive to shifts in market sentiment than that of other homebuyers. By exacerbating so-called boom-bust cycles in housing markets, investors could thus be a source of instability for the financial system and the economy more broadly.”