London has become a big magnet for real estate investors, who own about a third of all housing in the city and are scooping up entry-level properties, a new study show.
That’s putting added pressure on an already tight housing market and contributing to London’s affordability crisis, especially among first-time homebuyers and renters, some observers say.
According to a first-of-its-kind Statistics Canada report, 30.8 per cent of all property types in the London area, which includes parts of Elgin and Middlesex counties, were owned by investors in 2020. That’s above the provincial average of 24 per cent, and higher than those in Toronto (18.3 per cent) and Vancouver (22.1 per cent), Canada’s priciest housing market.
But London’s share of investor-owned properties goes up compared to the province and other larger centers when looking at lower-priced “starter properties,” such as townhouses, coveted by first-time homebuyers.
Though investors own only about 11 per cent of the market’s single-family homes, for example, they own 34 per cent of the city’s row houses, topping rates in Ontario (20.8 per cent), Toronto (16 per cent) and Vancouver (11.3 per cent).
That figure skyrockets when looking at London-area condo apartments, with investors owning a whopping 86 per cent – more than twice the Ontario average.
“I live in Vancouver. Very few things faze me when it comes to real estate. . . and I’m actually very shocked,” Andy Yan, director of Simon Fraser University’s city program, said of London’s figures, especially in the condo sector.
When investors buy up big chunks of housing, it makes it harder for many people to enter into home ownership, he said. That, in turn, forces them to keep renting, reducing rental unit availability and pushing rents up.
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That’s a visible reality in London, where rents have doubled in the last six years, coinciding with strong population growth, including large numbers of people drawn from other parts of Ontario by the city’s comparable affordability.
“If you’re building all these new units, but yet you know that these units are being competed for between people. . . looking for a place to live versus those looking for a place to invest, my supposition is those looking for a place for a home will be crowded out by those looking for a place to invest,” Yan said.
According to the latest Canada Mortgage and Housing Corp. (CMHC) rental report, the going rate for a London two-bedroom apartment in October was $1,664, beyond what’s deemed affordable for 60 per cent of Londoners.
According to Rentals.ca, a website landlords use to advertise units, the asking rent for a two-bedroom unit in the city was $2,142 in January.
One major issue London faces is the financialization of housing, said Jordan Smith, a local leader with the ACORN tenants group.
“The housing crisis is not fundamentally a lack of housing,” he said. “It’s a lack of affordable housing and the fundamental lack of targeted housing that actually meets the needs of the population.
“London continues to develop and that development is great, but the problem is, again, these homes are popping up across London. . . These giant houses that are being allowed to be developed on the outskirts of the city are not the housing that many people who live in this city can afford.”
Diana Mok, a Western professor who studies real estate finance, said several factors make London an attractive destination for investors, especially those eyeing condo apartments.
One is the city’s large student population, which makes London “a city full of demand for rental units.”
Interest in housing used as an investment tool is also likely to spike in Ontario after the province removed rent controls on new builds after 2018, Mok said.
“That may have created an incentive for Canadians to now become investors and landlords, in particular,” she said, noting condo units offer the advantage of having management companies take care of day-to-day operations and ensure properties are properly maintained.
“London has a lot of students who are good renters and become a stable source of income at least for the next four years,” he said.