Mortgage renewal payments to be higher going forward even as rates get cut
Canada’s housing affordability crisis is forcing some priced-out buyers to invest in fractional real estate ownership as one way to enter the market.
The average home price in some of Canada's largest cities has long exceeded $1 million, with average home prices in Vancouver reaching a price tag higher than $1.2 million and above $1.08 million in Toronto as of August 2023.
With those prices out of reach for many Canadians earning average incomes, one company is using artificial intelligence to offer people a chance to enter the residential and commercial real estate market at a price point they can afford – by purchasing a fraction of the property, along with other buyers.
“Our platform allows customers, especially young customers, to purchase a fraction of a property,” Khushboo Jha, chief executive officer and founder of real estate investment site BuyProperly, told BNNBloomberg.ca in a phone interview on Wednesday.
The service can allow customers’ money “to appreciate as it would have otherwise in the housing market,” she added.
"We are seeing a great interest from Canadians for this service as more and more people feel the housing market is a runaway train. Despite their saving every year, the price point of a home continues to escape them," Jha said.
RESIDENTIAL OR COMMERCIAL INVESTMENTS
Jha explained that investors have put as little in as $500 to start. People can choose to buy a residential property or buy into commercial real estate — an avenue in the real estate market that is usually closed off to the general public.
BuyProperly has been offering fractional real estate investment services since 2020. Investments are locked in for a five-year period, and Jha said it isn’t unusual to see a 20 per cent return each year, she said. There is also a secondary market to sell your piece in the property should you wish to do so sooner, she added.
“Since these assets are backed by physical land or buildings, there is less of a chance for volatility. We usually pick subsectors which can include medical buildings and storage as ways to diversify our customers’ real estate holdings,” she said.
Jha explained that unlike real estate stocks, known as Real Estate Investment Trusts (REITs), BuyProperly facilitates the investor’s purchase of physical property instead of a the stake in a publicly traded company, she added.
“When investing in a REIT, you are investing in a management team, and layers of portfolio management. With us, the investor is a direct owner of the property,” she said. However, like any investment, psychical real estate can also fall in value, she cautioned.
BuyProperly is currently working to offer more U.S. and Canada-based properties and is looking to create a reoccurring investment model that could make it easier for customers to add more cash into these deals.
“We’re looking to help anyone buy real estate who is currently priced out of this market,” she said.