Last Updated on November 13, 2024 by CREW Editorial
Investor ownership is influencing the condominium markets in key urban centers like Toronto, Vancouver, and other Ontario cities. Investors hold a significant presence among small condominium apartments in Toronto and Vancouver. In 2022, nearly two in five condominium apartments (38.9%) in the Toronto CMA were classified as investment properties, while 34.2% in the Vancouver CMA were also investment properties. Furthermore, some areas in Ontario exhibit a notably higher share of condominium apartments functioning as investment properties compared to traditional rental buildings.
Statistics Canada released data and insights on October 3, 2024, highlighting these trends, as well as their impacts on key metro markets, including shrinking condo sizes, pre-construction sales, tax-driven building classification practices, and investor-related impacts, which are shaping these markets.
Source: Statistics Canada
Pre-Construction and Decline in Unit Sizes
In the condominium market, developers rely on pre-construction sales to secure financing for their projects. Because investors are heavy buyers in pre-construction sales, their preferences play a significant role in determining what type of units get built. As a result, developers are tending to focus on smaller units, as investors perceive them to generate higher returns. Smaller units often bring in higher rent per square foot, making them more appealing for rental income purposes.
In Toronto, this preference for smaller units is becoming evident, with nearly two-thirds of units under 600 square feet owned by investors in 2022. In contrast, less than half of the larger, 800-square-foot units were owned by investors, emphasizing the trend toward smaller properties.
In Toronto, the median size of newly built units has shrunk dramatically, from 947 square feet in the 1990s to just 640 square feet for units constructed after 2016. Vancouver has experienced a similar trend, with unit sizes decreasing from 912 square feet in the 1990s to 790 square feet for newer units.
Source: Statistics Canada
Tax Incentives and Investor Ownership
Also noted in the Statistics Canada release, is that the historical presence of tax incentives has driven the increase in investor ownership in some Ontario cities. These incentives enabled large apartment buildings to face lower municipal tax rates if they were split into distinct condominium units, rather than being treated as a single rental property. This led to a higher number of condominium apartments being used as investment properties, particularly in cities like London, Windsor, and Kitchener-Cambridge-Waterloo.
In 2022, 85.5% of condominium apartments in London were owned by investors, far surpassing the provincial average of 43.5%. Windsor saw a similar trend, with 64.4% of units owned by investors, while Kitchener-Cambridge-Waterloo had an investor ownership rate of 60.7%.
Source: Statistics Canada
However, this pattern changes when excluding entire condominium apartment buildings owned by a single investor. Without these large-scale investor-owned buildings, the share of investor-owned condominium apartments in these cities drops closer to the provincial average.
The phenomenon of classifying large apartment buildings as separate condominium apartments for tax benefits is not as prevalent in Toronto. The share of investor-owned condominium apartments in the Toronto Census Metropolitan Area (CMA) has remained stable, with approximately four in ten properties being investor-owned. The stability of investor ownership in Toronto contrasts with the higher rates seen in some other Ontario cities.
Vancouver has followed similar trends to Toronto when it comes to investor ownership. The market continues to see strong investor interest, particularly in smaller condominium units. This reflects a broader pattern seen across both cities, where developers have responded to investor demand by building more compact living spaces.
Source: Statistics Canada
