The long game: Are investors helping drive up the cost of homes in N.B.?
Cory Allen purchased 3 Fredericton homes in past two years with intent to sell them 20 years later
Cory Allen owns seven units across two duplexes and a three-unit building, all on Fredericton's north side.
He says his costs to own and maintain the properties are so high that he's renting some of the units out at a loss to help keep rents low for his tenants.
But despite going into the red on his properties, he refuses to sell them, hoping their increased value later will help finance his retirement.
"What my hope is, is that the property values kind of stay with inflation so that when it's time for me to retire, I can sell these things, you know, and hopefully realize, kind of, the full growth."
Allen is part of a segment of homebuyers in Canada classed as investors — people who purchase residential properties aside from the one they live in.
According to the Bank of Canada, they've grown as a share of the people who buy homes across the country, while the share of people buying their first home has declined.
Allen said he's charging as little as he can in an effort to help his tenants, but experts say the growth in activity by investors like him is likely helping drive up costs for renters and for people looking to purchase a home just to live in.
"If more and more investors are buying up houses that maybe before would have been owned by an individual, you know, it is going to push up the price of that housing over the long run," said David Campbell, an economic development consultant based in Moncton.
High costs as a landlord
Allen, who lives just outside Fredericton, said he bought two homes in 2022 and the third in 2023, with the intent of renting them out.
Provincial property records suggest the two duplexes were occupied by their owners at the time, while the triplex was already non-owner-occupied.
Allen
says he thinks residential landlords are paying more than they should
to own and maintain their properties, including through the additional
portion of property taxes charged on non-owner-occupied buildings. (Shane Fowler/CBC)
He said the rents he charges range from $1,000 a month for a one-bedroom unit to $1,850 per month for a three-bedroom, utilities included.
Most months he either breaks even or sees a small loss.
Allen said he blames higher mortgage, insurance and tax costs his buildings incur because they are classed as commercial, non-owner-occupied properties.
He said he thinks landlords get a bad rap, but people don't understand all the costs that go into owning and maintaining a rental unit.
Allen said he'd even commit to reducing rents if the province dropped the tax rate on non-owner-occupied buildings, or if lenders and insurers offered lower rates for investment properties.
"I think that if we could get some of these costs reduced, so they weren't considered commercial, folks like myself would pass those cost savings on.
"And I think if enough of the small guys [landlords] lowered their prices ... the big guys would have to follow suit because everybody is … going to try to go to the lower prices, right?"
Soaring home prices
Allen purchased his three properties around the height of a home-buying frenzy in New Brunswick, which has seen the average price of a home spike from just under $180,000 in 2019 to $297,520 in 2023.
Experts have attributed the rise to surging demand for homes, driven in part by record inter-provincial and international migration into New Brunswick after the COVID-19 pandemic started.
Investor purchases likely had an effect as well, but to what extent is not fully understood, Campbell said.
"We know it's an increasing trend," he said. "Because of the frothy real estate market right now, a number of people have decided to invest in real estate as a long-term investment."
In 2022, the Bank of Canada published data showing the growth in home purchases by investors, first-time homebuyers, and repeat homebuyers, who include those selling their current home in order to purchase and move into another one.
The data showed growth in home purchases among the three classes was largely equal in 2019 and 2020, but starting in early 2021, purchases by investors began significantly outpacing purchases by the other two classes.
In a subsequent report, the Bank of Canada published more data, this time showing that investor purchases climbed from 20 per cent of all mortgaged home purchases in Canada in 2014, to 30 per cent in the first quarter of 2023.
At the same time, the share of mortgaged home purchases by first-time homebuyers declined, from 50 per cent to 43 per cent.
"House prices have climbed considerably since the start of the global pandemic," the researchers wrote in the report.
"Expectations of future price increases and strengthened investor demand likely contributed to this rise."
The Bank of Canada declined to provide an interview about the effect investor homebuyers are having on home prices in New Brunswick and said it did not have province-specific data to share.
Statistics Canada meanwhile has published limited province-specific data on investor-owned housing, which shows that 33 per cent of residential property in New Brunswick was owned by investors in 2020 and 2021.
Of all investment property types, single detached homes represented the largest share, at 64 per cent for both years. Out of all single detached homes in the province, about 14 per cent were classed as investments.
A Statistics Canada spokesperson said data wasn't available for previous years and that the agency is working on compiling data for 2022.
Better monitoring needed, says expert
A healthy housing market should have a certain combination of rental housing and owner-occupied homes, Campbell said.
However, if investors continue to compete more with first-time homebuyers, the upward pressure on home prices could force more people into renting, when they otherwise could have afforded to own, he said.
Campbell said the trend is one that is concerning and should be studied by the provincial government to better understand the effect that investors are having on the housing market.
"And then if required, you know, putting rules around this segment of the market to make sure it's not negatively impacting the overall environment for homeowners in the city," he said.
CBC News asked for an interview with Jill Green, New Brunswick's minister responsible for housing, but a spokesperson said the Finance Department would be better suited to respond.
CBC News then asked for an interview with Finance Minister Ernie Steeves about investor homebuyers in New Brunswick but did not receive one.
CBC News also asked the province by email whether it tracks investor activity in the housing market.
Spokesperson Mir Hyder provided a one-line email citing Statistics Canada's data showing 14 per cent of single detached homes were investment properties as of 2021.
Lack of rent control a problem
When an investor buys a home in New Brunswick, whatever costs they incur in paying the mortgage, insurance and property taxes can get passed down in full to the tenant.
That means whether or not the investment was sound, landlords can set the price wherever they want because there are no forms of rent control in the province, said Matthew Hayes, an urban sociologist and spokesperson for the New Brunswick Coalition for Tenants Rights.
Matthew
Hayes of the New Brunswick Coalition for Tenants Rights is calling for
rent caps. P.E.I. and Nova Scotia have them and still posted more
housing starts than New Brunswick last year. (Pascal Raiche-Nogue/Radio-Canada)
"What we really needed to do was bring in rent control," Hayes said.
"We should have done that at the start of the pandemic when we could see this wave of investment coming into the sector. We didn't do it, and the result of that is that people have gotten poor while trying to keep up with their rent."
Hayes said rent control could have helped stem the appeal of purchasing homes as investments, thus keeping home prices more stable in recent years. That would have not only been a good thing for tenants and first-time homebuyers, but also for longtime homeowners, he said.
"As the Bank of Canada points out, there is a relationship between the the growth in investor home-buying ... and this is having not just an impact on people who someday want to own homes, it's having an impact on people who currently own their homes in New Brunswick and who are paying, you know, galloping [property] tax costs."
Housing fair game for investment, Allen says
Asked what he thinks about the ethics of buying homes as investments, Allen said there will always be a segment of the population looking to rent instead of own.
As to whether investors like him are contributing to soaring home prices, Allen acknowledged he's no expert on the topic, but said he thinks Canada's growing population, combined with increases in labour and material costs, are the main reasons.
"Again, it's an investment really in the future for myself, but there's some work that goes along with that," Allen said, referring to the costs and labour involved in maintaining the properties.
"I'd like to see some changes from the provincial and federal policies that, you know, let us classify these things as residential, and bring the cost down. I think that would help a lot."
ABOUT THE AUTHOR
Comment by Wilbur Ross.
4 min ago
😭😭😭 All the investors on here wanting us to believe they aren't part of the problem ... 😭😭😭
Comment by Wilbur Ross.
7 min ago
Nothing funnier than people with three houses complaining about how much they pay in taxes.
Reply by David Amos.
6 min ago
Dear landlord
Please don't dismiss my case
I'm not about to argue
I'm not about to move to no other place
Now, each of us has his own special gift
And you know this was meant to be true
And if you don't underestimate me
I won't underestimate you
Bob Dylan
Comment by David Amos.
13 min ago
"Matthew Hayes of the New Brunswick Coalition for Tenants Rights is calling for rent caps"
I bet he would be singing a different tune if he had been elected Mayor years ago
Reply by Wilbur Ross.
12 min ago
Rent caps are common sense. Shouldn't be political. Higgs works with these investors to help exploit renters. Proven over and over.
Reply by David Amos.
7 min ago
Dear landlord
Please heed these words that I speak
I know you've suffered much
But in this you are not so unique
All of us, at times we might work too hard
To have it too fast and too much
And anyone can fill his life up
With things he can see but he just cannot touch
Bob Dylan
Comment by Wilbur Ross.
15 min ago
When has anyone anywhere ever ever seen any landlord lower rents??? They don't, they never have and never will. No one should ever believe any landlord who says they will. This guy is just looking for sympathy. Meanwhile the rest of us are just trying to make rent and buy food.
Reply by David Amos.
10 min ago
Dear landlord
Please don't put a price on my soul
My burden is heavy
My dreams are beyond control
When that steamboat whistle blows
I'm going to give you all I got to give
And I do hope you receive it well
Depending on the way you feel that you live
Bob Dylan
Comment by David Amos.
19 min ago
IMHO Cory Allen missed buying tickets for the Gravy Train by 3 years or so
Comment by David Amos.
22 min ago
"David Campbell, an economic development consultant based in Moncton, says there’s a relationship between home prices and increased investor activity."
What a wiseguy
Comment by Travis Ladwin.
31 min ago
Until the supply stabilizes then investment properties should be cracked down on, hard. People can barely afford to live.
Comment by SarahRose Werner.
1 hr ago
It's easy to complain about government deficits, but consider that our economy encourages individuals to take on substantial debt into order to buy homes ("mortgages"), transportation ("auto loans"), etc. Our economic system would look very different if it were based on the principles of avoiding debt and encouraging saving up for large purchases.
Reply by MR Cain.
49 min ago
With household debt more than $1.80 on the dollar, mainly due to mortgages, it is quite apparent people are living beyond their means. Do we really need more than one credit card?
Reply by Cory Crete.
46 min ago
Those means though may have been doable prior to the cost of living spike in 2019 onward. By then you were pretty much forced into paying for food, maybe even rent using your credit because wages didn't keep up; but let's ignore the math for many of these households who could have been at one point managing just fine before the crises.
Reply by MR Cain.
14 min ago
That figure is outdated to well before the "crises". Credit was easy. Our priorities are way out of whack when I hear about people feeding the kids macaroni and hotdogs, forgoing medicine, so they could pay the mortgage, fill the F150 with gas, and make sure we got the booze and smokes.
Comment by Cory Crete.
1 hr ago
This is why REITs should have never been a thing in anywhere Canada. It made sense until a certain party when nuts over populating country to ensure their REITs values went up. Housing should never have been an investment for retirement, as that has resulted in multiple ownerships, forced Canadians with good incomes out of the market and added to a housing crises not easily reversed now. Thanks again for ruining it for the majority, so glad at least one of you is trying to keep rents reasonable even though it's in part responsible for rents still being unreasonable regardless.
Comment by Wilbur Ross.
1 hr ago
The response from all levels of Higgs' Government says everything. The real estate lobbyists have thoroughly worked over Higgs, Green and Steeves. And now the Tories are firmly on the side of CFA landlords and they couldn't care less about the rest of us frankly. As a Party they don't even feel they owe us any sort of an explanation even in an election year. Higgs has declared open season on renters in this Province and the result is sky rocketing housing costs that only benefit vulture investors. And yet Higgs supporters love the higher property taxes, rents and housing prices for some reason. Stay in school folks.
Comment by Henry Hill.
2 hrs ago
Smart guy. Money makes money
Reply by Wilbur Ross.
1 hr ago
Sounds like he's made a bad 'investment' and wants everyone else to feel bad for him while he makes case for raising rents for his tenants to recoup his 'investment'.
Comment by Fred indie.
2 hrs ago
Meanwhile realtors having a gala time selling the same property twice, thrice & taking fat paychecks!
Comment by Bob Louie.
3 hrs ago
Another "Experts say" article from our highly subsidized broadcaster.
This sounds like another "analysis" piece written by the NDP.
Reply by John Gray.
3 hrs ago
Or your reading accredited journalism?
Reply by Bob Louie.
3 hrs ago
biased journalism
Reply by Eileen Kinley.
3 hrs ago
Could you provide specifics?
I found it a bit unbalanced that they even used the opinion of an investor as to the impact investment housing has on prices. What data is basing that opinion on?
Reply by Don Corey.
1 hr ago
Par for the course here.
Reply by Wilbur Ross.
40 min ago
This post sounds like you are a landlord or a lobbyist. You love the higher costs eh?
Reply by David Amos.
21 min ago
Yup
Comment by Cecile Smith.
3 hrs ago
Cory Allen has 7 rental properties that he is hoping to gain enough equity in to retire. If he can't break even now, he definitely paid too much for them, plus he probably can't do any of the maintenance on them by himself. Maybe he shouldn't be renting properties out? The reality is, if you can't do your own maintenance on the property, you are probably going to lose money on it.
Comment by Luc Newsome.
3 hrs ago
“ Experts have attributed the rise to surging demand for homes, driven in part by record inter-provincial and international migration into New Brunswick ”
In part?………… are you serious. It’s the major factor
Reply by John Gray.
3 hrs ago
It's not the major factor it's a good part of it though, remember in 2021 when the province put in rent freezes but lowered landlord taxes. Landlords found loop holes so rents still soared while they got tax breaks. Someone in government should of been fired for that
Comment by James Risdon.
4 hrs ago
Attacking small investors in the real estate market is an absurd and disingenous tactic to deflect from the much bigger problem of rapid population growth due to excessive immigration to Canada.
Normally, population growth in a country is caused by couples having children. When that happens, the children live with their parents for almost two decades as they grow up. Five- and six-year-olds do not buy property and drive up the demand for it and create a housing crisis.
Immigrants, though, do tend to rent or buy property because they tend to arrive as adults to fill jobs going begging for a lack of qualified candidates in Canada to do that work. That's great for resolving labour shortages. It's good for businesses looking to hire and it's also good for retailers who want to sell stuff to adults. More adults means more customers.
But, make no mistake, the flip side of that economic boon that immigrants provide is that immigration is inflationary. Adult immigrants buy or rent homes, contributing to rising rents and housing costs. They buy more cars, increasing demand and prices for vehicles. Everything about having record immigration to Canada is inflationary.
Except for one thing: wages. As labour shortages are filled by immigrants willing to work at what is now the average wage for the jobs they fill, they remove the pressure on employers to raise wages. The result is a gradually slower rate of wage increases because immigration allow employers to keep paying the going rate to workers.
The bottom line is record immigration causes inflation in consumer products while keeping wages lower than they would otherwise be.
Reply by JOhn D Bond.
3 hrs ago
Your premise that immigration is the cause of the inflationary bout we have just gone thru is inaccurate.
Immigration may impact some sectors of the economy with inflationary pressure, but as you noted, they also put downward pressure on wages a major contributor to inflation. Inflation contrary to popular mythology was not caused by any single activity, Rather a combination of the impacts of the pandemic, war in Ukraine, continuing geo political instability, and lets not forget, the investor class demanding a higher return on their investments.
Reply by Fred indie.
2 hrs ago
The govt must address immigration issues responsibly as they do not negate people of first nations, unlike in the past, Indigenous were exploited by illegal immigrants.
Reply by James Risdon.
2 hrs ago
Illegal immigrants should simply be deported back to their home countries. No country on Earth is morally or legally obligated to accept people who come into the country illegally.
I must confess, though, that I am ignorant as to how immigration in any way negates the First Nations.
Reply by Cory Crete.
1 hr ago
That's just it, your point would stand if immigration was done properly, responsibly while trying to not overburden the market. Right now we have a PM claiming he must continue keeping housing scarce for a selected few that benefit from scarcity for their retirement. (In other words their votes is what he is seeking) and frankly when you have a PM sitting on that while acting like he doesn't have his own REITs, he certainly does - it's countermining your argument by quite a bit and definitely is responsible for the high inflation across nearly all sectors as a result. More people introduces demand and then less supply; considering the rate JT let people in, that is how we got inflation on nearly every sector, too many let in needing too much supply at a time we didn't even have enough. That goes for food, housing, medical, etc.
Reply by David Amos.
2 min ago
I pity the poor immigrant
Who wishes he would've stayed home
Bob Dylan
Comment by Rick Richards.
4 hrs ago
Investor buys investment property at height of pandemic pricing and now complains he isn’t making profit and now thinks rules need to change…? Pfft, I feel no pity for this investor.
Everyone knew prices were inflated, everyone knows the taxation and laws regarding non-owner occupied dwellings (ie rental business). This is not an article, this is a news outlet providing a forum for a person to air personal grievances based on bad choices. I love how the landlord suggests he’s losing money every month, perhaps it’s because he bought properties at their highest prices ever and has realized you can’t charge whatever you want to rent out units, a poor budget choice and purchase decision has left this tenant with no choice if he wants tenants. That is nobody’s fault but his own.
Reply by Wilbur Ross.
10 min ago
Bingo! Well said.
Comment by SarahRose Werner.
4 hrs ago
If I were to take out a loan to purchase securities, I would not expect the dividends, interest, etc. paid out by the securities to cover my loan payments. I would expect that I wouldn't retrieve what I paid for the loan until I sold the securities (hopefully at a gain!).
When someone takes out a mortgage to buy a residential property as an investment, they should not be expecting the rents paid by tenants to cover their mortgage payments. Utilities, property taxes, insurance, maintenance, sure. But they should expect that they won't retrieve what they paid for the mortgage until they sell the property.
Too many investors want to have their cake and eat it too. They want rents to cover their mortgage payments, but they also want the proceeds when they finally sell the property. They expect their tenants to cover the cost of both their cakes.
Reply by James Risdon.
4 hrs ago
If tenants don't like the deal they're getting, they can just refuse to rent from those landlords.
Comment by Kate LeBlanc.
4 hrs ago
In a word YES!
Comment by Geordan Mann.
5 hrs ago
"At the same time, the share of mortgaged home purchases by first-time homebuyers declined, from 50 per cent to 43 per cent". This is obviously a key driver in rent increases. Landlords are no different than any other business, driven by the profit motive and therefore will take advantage of the situation. The relatively high price of housing including the initial down payment minimum and mortgage interest rates, create an investment cost that represents too much risk for many. Still, it is better than renting if you can manage it because ownership generally brings increased equity. The guy in this story is just trying to leverage that. Nothing new.
Comment by JOhn D Bond.
7 hrs ago
How quickly we forget. Buying properties to rent out so that you can sell 20 -30 yrs down the road for a profit is nothing new. It has been a tried and true way for small investors ( mom and pops) of the rental market that has worked well.
What doesn't work well is the large corporate landlords, buying up properties.
Lack of rent control a problem, yes but we need to stop mixing rental accommodations that are tied to income and rental housing for the remainder of the rental market.
No investor has a legal or moral requirement to offer housing at an operating loss. If there is that requirement then that is a role for the provincial government. If its labor laws allow compensation below a Living wage, they are choosing to have a disparity in the needs of the renters.
"When an investor buys a home in New Brunswick, whatever costs they incur in paying the mortgage, insurance and property taxes can get passed down in full to the tenant."
That means whether or not the investment was sound, landlords can set the price wherever they want because there are no forms of rent control in the province, said Matthew Hayes, an urban sociologist and spokesperson for the New Brunswick Coalition for Tenants Rights.
Wow talk about a one sided view. Those costs can be passed along across the entire country, NB is not unique with that.
It is not an issue for an advocacy group to suggest or determine what makes an investment a good or bad choice. Only the investor can make that choice unless we are going to regulate all investor investments across the spectrum of investment vehicles.
Reply by Lorraine Morgan.
3 hrs ago
Totally agree: No investor has a legal or moral requirement to offer housing at an operating loss. If there is that requirement then that is a role for the provincial government. If its labor laws allow compensation below a Living wage, they are choosing to have a disparity in the needs of the renters.