The Bank of Canada says investors are driving rapid price gains in the housing market.
Some context: Low interest rates at the start of the pandemic encouraged people to enter the housing market and made it cheaper for investors to snap up properties to flip or rent.
What’s happening: The Bank of Canada said the number of new mortgages held by investors has doubled in the past year, while home purchases by first-time owners has dropped by 45%.
- This is driving up house prices and forcing people to take on larger mortgages, accumulating record high-levels of debt.
- Investors are also pricing people without deep pockets out of the housing market, especially in Toronto and Vancouver.
Big picture: Investors chasing strong returns tend to be more likely to sell their properties in a downturn as opposed to people who live in their home. This can excacerbate swings in the housing market and potentially lead to turbulence in our economy.