Jul 12, 2023
Interest in investment rental properties is beginning to wane: Experts
, BNN Bloomberg
Bank of Canada trying to balance risks, Macklem says
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Another interest rate hike from the Bank of Canada is likely to slow the demand for investment properties throughout the country’s largest cities, experts say.
As of Wednesday, the BoC’s overnight lending rate has risen to 5.0 per cent for the first time since 2001. Housing experts are warning that this heightened interest rate environment is putting additional pressure on Canada’s crowded rental market as demand to buy investment properties has fallen given the escalating costs.
“We’re seeing that it’s just simply not worth it for some landlords to keep their investment properties, or even get into the market, when they’re stretched so thin,” John Martino, founder of New Era Real Estate, told BNN Bloomberg in an interview on Wednesday.
He explained that many owners of investment properties with variable mortgages, and those whose fixed mortgage are up for renewal, are looking to offload their units as they cannot financially keep up with the costs.
“The expenses that come along with carrying a rental property have not kept up with incomes,” Martino noted.
Even those looking to a buy an investment property in this climate will need to have a strong cash flow to do so and take advantage of the ability to buy properties for the first time in quite a while, as we anticipate new highs this time next yea, he added.
“People who can’t come up with an outsized down payment for an investment unit will likely have a harder time holding onto one if they do buy simply because of the rate hikes,” Martino said.
The interest in buying an investment property in some of Canada’s largest cities is declining, Kevin Lee, chief executive officer of the Canadian Home Builders Association (CHBA), told BNN Bloomberg in an interview.
“There’s no question that with higher interest rates the demand for building rental properties has dropped,” he stated.
This creates a shortage of rental units for Canadians, who are already facing a massive housing shortage, Lee added.
“It doesn’t make business sense to build more rental properties in this rate hike environment because there isn’t the financial payoff due to high interest rates, and taxation remains very high” he explained.
He is calling for immediate government intervention. Policies that would help the affordability of Canada’s rental market include removing GST from the construction of purpose-built rental properties and an update on the GST New Housing Rebate thresholds — which have not been changed since 1991, Lee stressed.
“We’re going to need some federal measures here that will make building these units possible, because right now we’re headed in the wrong direction,” he said.
As of Wednesday, the BoC’s overnight lending rate has risen to 5.0 per cent for the first time since 2001. Housing experts are warning that this heightened interest rate environment is putting additional pressure on Canada’s crowded rental market as demand to buy investment properties has fallen given the escalating costs.
“We’re seeing that it’s just simply not worth it for some landlords to keep their investment properties, or even get into the market, when they’re stretched so thin,” John Martino, founder of New Era Real Estate, told BNN Bloomberg in an interview on Wednesday.
He explained that many owners of investment properties with variable mortgages, and those whose fixed mortgage are up for renewal, are looking to offload their units as they cannot financially keep up with the costs.
“The expenses that come along with carrying a rental property have not kept up with incomes,” Martino noted.
Even those looking to a buy an investment property in this climate will need to have a strong cash flow to do so and take advantage of the ability to buy properties for the first time in quite a while, as we anticipate new highs this time next yea, he added.
“People who can’t come up with an outsized down payment for an investment unit will likely have a harder time holding onto one if they do buy simply because of the rate hikes,” Martino said.
The interest in buying an investment property in some of Canada’s largest cities is declining, Kevin Lee, chief executive officer of the Canadian Home Builders Association (CHBA), told BNN Bloomberg in an interview.
“There’s no question that with higher interest rates the demand for building rental properties has dropped,” he stated.
This creates a shortage of rental units for Canadians, who are already facing a massive housing shortage, Lee added.
“It doesn’t make business sense to build more rental properties in this rate hike environment because there isn’t the financial payoff due to high interest rates, and taxation remains very high” he explained.
He is calling for immediate government intervention. Policies that would help the affordability of Canada’s rental market include removing GST from the construction of purpose-built rental properties and an update on the GST New Housing Rebate thresholds — which have not been changed since 1991, Lee stressed.
“We’re going to need some federal measures here that will make building these units possible, because right now we’re headed in the wrong direction,” he said.
