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The influence of investors


The average cost of a home jumped to another, new, record high in Canada in January. The Canadian Real Estate Association puts the price at $748,450, a 21% increase from the same period last year and up nearly 5% from December. (As usual Toronto and Vancouver skew the average higher. When they are left out of the calculation the average drops about $160,000 to $588,450.)


Over the last several months so-called “investors” have been getting the blame for fuelling the surge in prices. Well known bank economist Douglas Porter says they are driving demand in a very tight market.


“Study after study in recent months has shown that investors have played a huge role in this.” “Admittedly, there isn’t enough supply to meet the seemingly insatiable demand from investors,” he says.


“There is a speculative fever that takes over private markets, and that’s what is playing out,” says Peter Routledge, head of the Office of the Superintendent of Financial Institutions, the federal banking regulator.


But an examination of data, compiled by the Bank of Canada, by Real Estate professor Murtaza Haider and realtor Stephen Moranis suggests the influence of investors has not increased.


Investors – homeowners with multiple mortgages assigned to them – make up about 20% of buyers. That proportion has been very consistent since 2014, well before the current run up in prices. Even while 20% is a significant market segment, it is smaller than first-time buyers, who represent about half of the market, and repeat buyers – those who discharge one mortgage and replace it with a new one – make up about 30%.



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