Released on Sept. 8, the central bank’s data shows that investors accounted for 29.9 percent of home purchases nationwide in the first quarter of this year—an increase from the 28.25 percent recorded during the same period last year, and 21.78 percent in 2020.
“House prices have climbed considerably since the start of the global pandemic. Expectations of future price increases and strengthened investor demand likely contributed to this rise,” said the bank in a note, which defined investors as homebuyers who obtained a mortgage to buy a property while maintaining a mortgage on another one.
Compared to the investors, the trend speaks differently for first-time homebuyers: the share of mortgaged home purchases for this group dropped 5 percentage points, from 47.94 percent in quarter one of 2020 to 42.57 percent in the same months of this year. A similar trend was observed for repeat homebuyers whose share of purchase fell from 30.29 percent to 27.53 percent over the same period.
The BoC noted investor activities have considerable influence on residential real estate, such that it “can amplify house price cycles.”
“During housing booms, greater demand from investors can add to bidding pressures and intensify price increases,” the bank said. “Similarly, when prices are stable or declining, a lower influx of investors can add downward pressure on housing demand and prices.”
Among the metrics measured, the BoC also tracked the share of Canadian households who missed their payments in various debts for at least 90 days. Late payment in mortgage accounted for 0.12 percent of the households in quarter two of 2023. Meanwhile, 2.17 percent of households had trouble keeping up with “instalment loans,” followed by 0.87 percent in credit cards and 0.57 percent in automobile loans in the same period.
The percentage of new borrowers who spent more than 25 percent of their annual income on mortgages surged from 14.74 percent to 29.18 percent between the first quarter of 2020 and 2023, the BoC noted.
“All else being equal, a household that spends a large portion of its income on mortgage payments may be more vulnerable to financial stress—it may be more likely to fall behind on debt payments if a negative income shock or a rise in mortgage interest rates were to occur,” analysts wrote.
The last 18 months has seen the BoC hike its interest rate from a low 0.25 percent in March 2022 to a high 5 percent this month, triggering higher prime rates and variable and adjustable mortgage rates along the way.
The central bank says it won’t rule out further hikes.
Bryan Jung, Marnie Cathcart, and Peter Wilson contributed to this report.