26% of Canadians plan to buy an investment property in the next five years

Despite sky-high interest rates and home prices, Canadians are not over the craze of owning an investment property.

According to a new report from Royal LePage, more than one-in-four Canadians (26%) plan to buy an investment property between now and 2028.

Royal LePage surveyed 1,003 Canadian adults in March this year.

Of those surveyed, 11% — about 4.4 million — already own a property, and among that group, more than half plan to buy an additional investment property.

Meanwhile, 23% of those who don’t currently have an investment property to their name want to own one in the next five years.

What are investors looking for?

Royal LePage’s observations show that 44% of real estate investors own single-family detached homes, maintaining their position as the most popular investment property nationwide.

Condos follow in the second position (37%), and townhomes in the third (11%).

In Greater Vancouver, 67% of real estate investors own one residential investment property, compared to 64% in Toronto and Montreal.

Over half (54%) of Vancouver-based investors said they would likely purchase an additional residential investment property within the next five years. In Toronto, this number stands at 47% and in Montreal, it is 52%. For context, the national average for potential re-investors is 51%.

The chance to see property appreciation over the long term is the top priority for investors (69%). Monthly cash flow ranked as the second priority (54%), and low maintenance costs and variable expenses stood third (44%).

Location was also critical to real estate investors: 44% told Royal LePage that they had bought an investment property in a different town or city than where they currently reside.

“Access to a post-secondary educational institution is also a major factor, with 47% of investors reporting that proximity to a major Canadian university or college motivated their decision to buy in a particular location,” the Canadian real estate company noted.

Investments trends at a glance

Some residential investors (15%) don’t even own their primary residence, and 12% — most of whom fall between ages 18 and 34 — pay rent. Three percent live with family or friends without paying for housing.

With high lending rates rocking the housing market since the slowdown of the pandemic, 31% of real estate investors have considered selling their property.

“Much higher mortgage rates and the increased cost of home maintenance and utilities have prompted some over-leveraged investors to consider selling,” said Phil Soper, president and CEO of Royal LePage.

He added that there was speculation that the investor segment would experience a severe downturn during the pandemic, especially since construction projects were postponed. Many people moved out of downtown neighbourhoods and, as a result, landlords slashed rents significantly — but this was short-lived.

People returned to urban centres once the pandemic was contained, and rents rose to unprecedented heights.

“Like any financial investment, real estate comes with its own set of potential risks,” said Soper. He advises new investors to lean on expert input from financial advisors, mortgage brokers, and real estate agents to ensure the investment aligns with their long-term strategy and risk tolerance.

What do you think of these trends? With a higher rate of investment-based real estate purchases, will Canada’s rental housing market suffer or thrive?

Let us know your thoughts.