A larger proportion of GTA real estate investors say increased lending rates have caused them to consider selling their investment properties, compared to other major urban centers.
Real Estate is still one of the most reliable and sound investments, despite the rapid rise in home prices and the cost of borrowing. But landlords and property investors are starting to feel the pinch on their ROI and many are either considering or being forced to sell one of their properties in order to take some of the pressure off. In anticipation of impending mortgage renewals on the horizon, some investors, especially in the GTA, are finding that their current rental income can only take them so far and that their cash flows are not as positive as they once were. But real estate investors are pretty savvy, most being aware that the market will eventually bounce back, interest rates will eventually come down and that positive appreciation over time will still prevail. So, while many landlords are considering selling, many others still have a positive outlook and plan to buy more properties in the near future.
Although owning a home is part of the Canadian dream, the lure of owning multiple homes as an investment is a very attractive investment to many. While owning a primary residence is itself a viable investment, many Canadians look to real estate investing as a means to build financial security; the benefit of which is not only having a tangible asset and possibly monthly cash flow, but also the potential for appreciation over time. Consumers are becoming more educated on real estate investing, and their confidence and interest in the sector have increased in recent years. As the generation who grew up watching income property shows on HGTV, savvy millennials looking for opportunities to build generational wealth are a fast-growing segment of the GTA investor market.
According to a recent Royal LePage survey conducted by Leger,1 36% of investors in the Greater Toronto Area say that increased lending rates have caused them to consider selling one or more of their investment properties, more than the national average of 31% and higher than the figures reported in the Greater Montreal Area (26%) and Greater Vancouver (28%). When asked about their plans for the future, 24% of investors in the region say they are likely to sell one or more of their investment properties within the next two years.
It’s important that an investor can withstand market downturns from time to time. During the pandemic, we saw some first-time investors enter the market when interest rates had dropped to record lows and home prices were beginning their upward climb. Fast-forward a year or two, and they are now faced with significantly higher borrowing costs, likely resulting in neutralized or decreased monthly income. Working with a real estate professional who understands the ins and outs of investing and can offer insights into the short- and medium-term outlook of the market can be supremely beneficial. Historically speaking, the GTA has been a thriving market for real estate investors. I imagine in the years to come, the region will continue to attract quality investors from all over.
Some investors, however, remain optimistic about the future. 47% of investors in the GTA say that they are likely to purchase an additional residential investment property within the next five years – lower than the national average of 51% and the figures reported in the Greater Montreal Area (52%) and Greater Vancouver (54%).
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