A new survey of exchange rates shows significant changes in perception, with nearly one-third of respondents expressing doubts that the apartment retains its status as a reasonable investment.
A survey of 1,568 Canadians painted a picture of the investment appeal of the apartment market.
A staggering 57% said they would not consider buying apartments for any reason, and only 11% viewed them as viable investment opportunities.
“Investor confidence has certainly been eased,” Kevin Wong, a mortgage agent at Swivel Mortgage Group Inc., Ontario, observed.
He noted that some investors divested from apartment properties and transferred funds to alternative investments such as stock markets or real estate markets in areas such as Alberta, pointing to the convergence of factors that could contribute to this shift. Rising inventory levels are putting down pressure on apartment prices. While this may provide buyers with an easier access point of entry, it gives sellers a challenge to compete with oversupply units.
Statistics Canada data between 2016 and 2020 showed that a large number of apartments in five provinces, including Ontario and British Columbia, are used as investment properties.
This trend is partly attributed to the relative affordability of apartments compared to independent houses, attracting individuals seeking to become landlords.
It is worth noting that over half of the residences in downtown Toronto and downtown Vancouver are apartments, a large portion of which are rented.
But the trend seems to be turning. Rate.CA highlighted concerns surrounding a slowdown in the rental market.
The latest CACA data shows that the national average rent fell 2.8% in March, an average of $2,119.
This softened rental landscape, coupled with the increased costs associated with property taxes and maintenance costs for apartment owners, is the investor’s profit margin.
Despite the overall decline in investment confidence, apartments still exist as an entrance to home ownership, especially among young Canadians.
The survey found that 45% of non-home people are still considering buying apartments, including high-income individuals with incomes of $100,000 or more.
Additionally, 28% of Canadians aged 18 to 34 prefer to view apartments as a good investment.
“Apartments are the lowest entry point for many,” Wong explained, Statistics Canada’s 2019 data echoed the sentiment, suggesting that first-time home buyers in British Columbia (37.8%) and Ontario (16.5%) chose apartments.
