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A new report from CIBC and Urbanation suggests that real estate investors in Canada's largest cities, such as Toronto and Vancouver, are facing increasing pressure that could have a significant impact on the rental market. The report reveals that a majority of investors in the Greater Toronto Area (GTA) are experiencing negative cash flows for their properties, with the income generated by rents failing to cover mortgage payments, property taxes, and other expenses. This situation is attributed to the Bank of Canada's rapid rise in interest rates, which has led to higher borrowing costs for mortgage holders. As a result, investors may become less interested in purchasing new properties or may consider selling their existing ones, potentially reducing the supply of rental units and driving up rental costs.

The importance of investors in the rental market is emphasized, as they account for a significant portion of condo units built in cities like Toronto and Vancouver. The lack of purpose-built rentals to accommodate renters in the Greater Toronto Area is a concern, and if investors are discouraged from buying, it could hinder new construction. Although the potential increase in investor properties entering the ownership market might benefit homebuyers, it is unlikely to have a substantial impact on supply and housing prices. Experts warn that the lack of purpose-built rental apartments in the construction pipeline is insufficient to offset the potential decline in investor activity, leading to further affordability issues for renters.

The article also highlights the constant pressure on the rental market caused by immigration. Immigrants often prefer to rent when they first arrive in Canada, and the rental rates in major cities or transportation costs for commuting can pose significant challenges. The current housing market conditions expose newcomers to difficulties in realizing their Canadian dreams. There is an intention from larger, institutional investors to build more rental housing, but the high interest rate environment and development cost pressures are discouraging them. The article suggests that governments should consider addressing the pain points by reducing fees, taxation, expediting approval processes, or allowing greater density in cities to incentivize investment in rental properties and bridge the supply gap.

Read the full article on: Global NEWS