More and more consumers in Vancouver and Toronto are purchasing and moving to new properties even as they continue to maintain ownership of their old homes, taking advantage of the unprecedented demand in these overheated markets.
“In essence, their old principal residence becomes an investment property — one they hope will deliver some income but more importantly will lead to massive capital appreciation,” real estate reporter and long-time markets observer Garry Marr wrote for the Financial Post.
While definite figures have yet to be collated, TD Bank associate vice president of real estate secured lending Pat Giles stated that “doubling up” in an increasingly common practice not only in Canada’s leading markets, but all throughout the country as well.
“I don’t have the numbers behind it, but I can tell you anecdotally, we have seen many customers considering income properties, and that’s probably not surprising given the low interest rate environment we are in,” Giles said.
“It’s still a very small portion. But in the low-rise market the potential for speculating or flipping is high. When prices rise, people take risks,” CIBC World Markets deputy chief economist Benjamin Tal agreed.
A major driver of the phenomenon is the prevailing environment of home price growth, which facilitates generous profits for flippers. In August, Vancouver saw a 36 per cent year-over-year rise in the average price of detached homes, while Toronto experienced a 21.5 per cent increase in the same property type over the same time frame.
However, while going for this option might seem reasonable in light of the current fiscal climate, Scotiabank vice president of real estate secured lending Janet Boyle said that it’s not for everyone.
“Having an investment property is a lot of work. There’s upkeep, you have to stay current, municipal regulations, just a variety of things to consider,” Boyle cautioned.