![The Decline of Canadian Real Estate Investment?](https://www.jessijohnsonrealtor.ca/wp-content/uploads/2024/07/123-1024x512.png)
Canadian real estate investors are becoming increasingly scarce. Government restrictions are prompting investors to redirect their funds to other opportunities, often outside of Canada. Investors are crucial for purchasing properties, ideally upgrading and maintaining them, and creating rentals for the market. Most Canadians can no longer afford to buy homes and are forced to rent, which is a separate issue altogether.
The ban on Airbnb has a minimal impact on investor buyers but has led some owners to list their homes to avoid dealing with tenancy laws that heavily favor tenants. Is this beneficial? While there are more listings, there aren’t necessarily more rentals. Moreover, without Airbnb, tourists visiting Vancouver face exorbitant hotel fees, potentially deterring them from visiting altogether. This could harm tourism more than it helps the housing market. Personally, I refuse to spend over $500 a night for a hotel and will only travel to cities with Airbnb options in most cases.
The new requirement of a four-month notice to move into an existing tenanted property, along with a one-month rent payment to the tenant, is discouraging buyers from purchasing tenanted properties.
The minimal allowable annual rent increase does not keep pace with inflation, high interest rates, and maintenance costs. This makes taking on a property with an existing tenant a significant burden, often resulting in a cash-negative situation. Savvy investors will avoid such properties.
The ban on flipping is driving those investors to seek opportunities abroad. Flipping investors buy properties in poor condition and renovate them for the next buyer. I don’t see the harm in this practice or why the ban is in place. Consequently, more investors are leaving the market.
The updated capital gains tax on selling rental properties is causing investors to reconsider the value of investing here if they stand to lose a significant portion of their profits upon sale. Again, they are looking elsewhere to invest their money.
Yes, the foreign buyer ban has had a positive, albeit minimal, effect. However, it came 40 years too late, and the damage was already done.
Reckless levels of federal immigration are likely to drive rental rates even higher.
Our provincial and federal governments are currently in disarray, and things appear to be getting worse before they get better.
Even more concerning is the federal government’s consideration of taxing principal residences. If that happens, how many citizens will give up, say “Forget this,” and leave Canada?
Money is leaving Canada at record levels, and the situation is about to deteriorate further. This is not good for our country. We need new governments at both the provincial and federal levels.
To make money in real estate today, it is best to buy a principal residence, renovate, and live in it until the government allows you to sell without heavy penalties. Rinse and repeat.
Buying long-completion presales is also an option, primarily for principal residences. However, with the near-ban on assigning/flipping them, it is no longer an ideal investment strategy.
More importantly, what do you think?
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