Investors in the condominium apartment market, 2022

Released: 2024-10-03

Concerns have been raised in recent months about the state of the condominium apartment market in large cities such as Toronto and Vancouver.

In part, these concerns relate to how prices remain near their COVID-19 pandemic-era peak, despite low sales volumes and rising inventory levels. For first-time homebuyers facing higher interest rates, these high prices and interest rates make units difficult to afford, and many condominium apartments are perceived to be too small for long-term or family-friendly living.

Recent media reporting has documented that investors are increasingly wary of purchasing pre-construction condominium apartment units because they often lose money relative to mortgage payments on existing rented units (negative cash flow), even with rising rents. In addition, some investors do not envision strong future price growth amid higher interest rates. This has contributed to a sharp drop in pre-construction sales, causing developers to delay or cancel projects, which may lead to lower future housing supply.

Today, the Canadian Housing Statistics Program is publishing data on investors and investment properties that are relevant to these discussions. These data are for the 2022 reference year and they cover five provinces: Nova Scotia, New Brunswick, Ontario, Manitoba and British Columbia.

Investors are more prominent among small condominium apartments in Toronto and Vancouver

Condominium apartments are the most common type of property owned by investors in census metropolitan areas (CMAs) like Toronto and Vancouver. In 2022, nearly two in five condominium apartments (38.9%) in the Toronto CMA were investment properties, while this was the case for about one in three (34.2%) in the Vancouver CMA. In these CMAs, new condominium apartment projects often rely on presales to investors to be built. Investors buy pre-construction units with the goal of making a profit when the buildings are complete—either by renting them out or by selling the unit at a higher price. These pre-construction sales are used by developers to secure financing for the projects. This dynamic means that investor preferences may have an influence on the type of buildings that get built.

One concern with this process is that it may lead to the construction of more properties with smaller units. Investors are perceived to prefer these units because rent per square foot of living area tends to be higher for smaller units. This may have contributed to the shrinking size of condominium apartments in CMAs. For example, in the Toronto CMA, the median living area of condominium apartments built in the 1990s was 947 square feet, compared with 640 square feet for those built after 2016. In the Vancouver CMA, the median size also declined over the same period, from 912 square feet to 790.

The data released today show that there is a higher proportion of investment properties among smaller units (under 600 square feet) than among larger, more family-friendly units (800 square feet and over). For instance, in 2022, in the Toronto CMA, close to two-thirds (64.5%) of the new condominium apartments built after 2016 that are under 600 square feet were investment properties, compared with 44.1% of those that are 800 square feet and over. Meanwhile, the proportion of smaller units among new builds increased over time, from 7.7% of those built in the 1990s to 38.4% of those built after 2016.

A similar pattern held in the Vancouver CMA, where nearly three in five new condominium apartments that are under 600 square feet (58.4%) were investment properties in 2022, compared with 38.9% of those that are 800 square feet and over. The proportion of smaller units in new construction has also increased in recent decades, although this trend is less pronounced than in the Toronto CMA.

Chart 1 
The proportion of condominium apartments that are under 600 square feet grows in the census metropolitan areas (CMAs) of Toronto and Vancouver

Chart 2 
The proportion of condominium apartments that are 800 square feet and over decreases in the census metropolitan areas (CMAs) of Toronto and Vancouver

Higher share of condominium apartment buildings operating like rental buildings in Ontario

In some parts of Ontario, the share of condominium apartments used as investment properties is notably high. In 2022, this was particularly true in the London CMA, where 85.5% of condominium apartments were used as investment properties, and in the CMAs of Windsor (64.4%) and Kitchener-Cambridge-Waterloo (60.7%). These figures are well above the provincial average of 43.5%.

Chart 3 
The share of condominium apartments used as investment properties varies in the 10 largest census metropolitan areas in Ontario, 2022

A potential explanation for these results is that some large condominium apartment buildings are owned entirely by a single business entity and are run as if they are rental apartment buildings. This phenomenon emerged in part because of tax incentives that used to prevail in some Ontario cities, whereby buildings split into distinct condominium apartments could face lower municipal tax rates than rental buildings. As a result, developers of large apartment buildings would sometimes classify them differently for tax purposes, rather than treat them as a single rental property.

When excluding condominium apartment buildings owned by a single investor, the share of condominium apartments used as investment properties would drop to a level closer to the provincial average in most CMAs in Ontario. Excluding these properties, the share of investment properties among condominium apartments in 2022 was 37.2% in Windsor, 47.0% in Kitchener-Cambridge-Waterloo and 47.6% in London. It is notable that this phenomenon is not prevalent in the Toronto CMA, where the share of investment properties among condominium apartments remained stable, at about 4 in 10 properties. This phenomenon is also less prevalent in the other provinces studied.

Chart 4 
The share of condominium apartments used as investment properties varies less among census metropolitan areas in Ontario when excluding condominium apartment buildings owned by a single investor, 2022

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).