Almost 20% of Pandemic Homebuyers are Traders

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Do you know someone who bought a home during the pandemic? It turns out there’s a 19% chance that they already own several properties.

A recent survey by RATESDOTCA and BNN Bloomberg found that out of the respondents who purchased a home within the last 18 months, nearly one in five already owned multiple properties. The remaining respondents were almost evenly split — 40% were first-time home buyers, while 39% were resale buyers.

That neatly matches data published in the Bank of Canada’s 2021 financial system review, which found that investors represent 20% of all home purchases in Canada.

Many suspect that the increase in demand from speculators has contributed to the soaring prices of Canadian real estate during the Covid-19 pandemic, with annual increases averaging around 30% — even in smaller cities and rural areas.

With housing supply at historic lows, any increase in demand is naturally going to send prices shooting skyward.

“Prices are going up, and investors that are speculating on the increase in price are adding to the demand pressures because some of them are buying these homes,” Bob Dugan, chief economist at the Canada Mortgage and Housing Corporation, told The Globe and Mail in November 2021. “That is something that worries me because that adds extra froth to the market, pushes home prices higher and can create a harder landing if and when the market turns and prices correct.”

The average house price now stands at an incredible $713,500, according to the latest figures from the Canadian Real Estate Association. Even outside the pricier markets of Greater Toronto and Vancouver, a Canadian home will still hit the pocketbook hard, at $563,500.

With prices climbing so rapidly across the country, RATESDOTCA and BNN Bloomberg were curious as to how respondents were paying for their down payment. It turns out that almost half are doing the old-fashioned way — from their personal savings. Around a quarter said they are getting the money from selling another property, while 19% said they are getting it from their family. Another 14% said they are taking out a home equity loan from a current property. 

Most respondents report putting down a sizeable down payment of at least 20%, which is required for borrowers purchasing a home worth $1 million or more.

The survey also found that a vast majority of homebuyers (71%) opted for a fixed mortgage rate, with only 18% choosing a variable rate.

Fixed mortgage rates currently come at a premium compared to variable rates, and also entail higher penalties to break the mortgage early. But on the other hand, fixed-rate borrowers won’t be hit with surprise rate hikes during their term. 

Five-year fixed mortgages are consistently the most popular product with Canadians, who tend to prefer stability. While The Bank of Canada dropped and held interest rates down during the pandemic, it has signalled it will begin raising rates in March.

The survey was conducted online between January 7 and 9 with 1,547 respondents – 9% of whom had purchased a home within 18 months.

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