A recent survey conducted by Royal LePage reveals a surge in Canadian confidence toward real estate investment. With over a quarter of Canadians planning to invest in the next five years, the report sheds light on growing interest and motivations among investors.
According to the report, 51 per cent of current investors and 23 per cent of non-investors are considering the purchase of an investment property before 2028.
“Many choose to invest in real estate not only as a way of generating income and reaping the benefits of value appreciation but to provide an opening into the market for future generations of their family,” said Phil Soper, president and CEO, Royal LePage.
“Despite the hurdles of low home supply and increased lending rates, young people are more inclined than ever to make real estate investing a part of their financial planning for the future. In fact, survey results tell us that many of them are actually prioritizing an investment property over owning their primary residence.”
Younger Canadians show strong interest in real estate investment
The survey indicates that younger Canadians, specifically those aged 18 to 34, are particularly inclined towards real estate investment. In fact, 44 per cent of this age group own two or more investment properties, surpassing their older counterparts.
Additionally, 67 per cent of young investors in this age range own their primary residence. This trend reflects a shift in priorities, with some younger Canadians prioritizing investment properties over owning their own homes, viewing real estate as a means to build wealth and provide opportunities for future generations.
Location, amenities and property type remain key factors for investors
The survey findings highlight that location, amenities, and property type continue to be important considerations for real estate investors. Single-family detached homes are the most popular investment property type, owned by 44 per cent of respondents. Condominiums and townhomes follow as the second and third most preferred property types, respectively.
Canadian investors prioritize long-term property value appreciation, positive cash flow, and low maintenance costs or variable expenses when making investment property purchase decisions. Furthermore, 44 per cent of investors own properties in different towns or cities from where they currently reside, and proximity to post-secondary educational institutions also influences their investment decisions.
“While much of the emotion is removed from the buying process of an investment property compared to purchasing a home for personal use, investors value many of the same characteristics, such as location, local amenities and property type,” added Soper.
“Many real estate investors extend their search into more affordable markets and are prepared to take on the additional commitment of owning property beyond the region in which they live to cash in on the financial benefits.”
According to the report, 15 per cent of residential investors do not own their primary residence – 12 per cent of investors rent, the majority of whom are aged 18-34, while three per cent live rent-free with family or friends.
“I find it interesting that a material number of investors do not own the home they themselves live in. Many of these people have likely invested in a more affordable city than the one they live in,” Soper says. “This tactic demonstrates Canadians’ deep-seated belief that real estate is a worthwhile long-term investment.”
Increased lending rates prompt consideration of selling for some investors
The report highlights that increased lending rates have impacted variable-rate mortgage holders and investment property owners in Canada. As a result, 31 per cent of investors have considered selling one or more of their properties.
Notably, investors aged 18 to 34 are the most likely to contemplate selling their investment properties, with 54 per cent considering this option. However, Soper says it’s important to note that the temporary downturn experienced by the investor segment during the pandemic proved to be short-lived, and the resilience of the real estate market demonstrated its long-term viability.
“Rents not only rebounded, they rose sharply, and it became obvious that the sector’s downturn was temporary. This only underscores the importance of working with a real estate professional who can help investors make sound, long-term purchase decisions that can withstand short-term economic turbulence.
Looking ahead, 44 per cent of investors say they intend to keep their investment property or properties in their current state over the next two years. During the same period, 26 per cent of investors plan to renovate one or more of their investment properties, while 24 per cent plan to sell one or more of their homes.
Soper adds, “Investors play a pivotal role in supplying much-needed housing units to renters across the country and will continue to be an important part of the Canadian real estate ecosystem as the nation welcomes an unprecedented number of immigrants in the coming years.”
