First time home buyers are slowly being ushered out as investors swoop in. That's what new BoC data suggests. Before the pandemic, investor interest and demand for real estate was dwindling. But when interest rates were slashed in 2022, investor interest was revitalized, subsequently capturing record market share. In this year's first quarter, Canadian investors were responsible for 1 of 5 homes purchased.
BoC data indicates investors purchased 22 per cent of homes with a mortgage in last year's fourth financial quarter. It's likely that this rate was actually quite higher, as the BoC only utilized consumer mortgage data.
The correlation between low rates and increased investor demand is quite notable. After a rate in 2017's Q3, investor demand reached 20 per cent the following quarter. Higher rates caused investor market share to drop as rates continued to push upward. This trend had investor market share plummet through to 2020.
Almost immediately after the dramatic interest rate decrease in 2020, investor demand intensified. By Q4 2020, the market share had taken shape of a high growth pattern.
Early last month, RBC warned that investors are uprooting first-time buyers with their portfolios. It's a trend that requires more data points to fully confirm. 90 per cent of the recent housing supply surge was scooped up by investors. Incoming supply isn't necessarily making housing more affordable, though.
With interest rates on the rise, investor interest and demand is expected to drop and housing inventory is likely to keep increasing.