There’s An Investment Opportunity Hiding In Plain Sight

There’s a lot of uncertainty surrounding the housing market right now, and with uncertainty comes negativity. Clickbait headlines. Grim forecasts. Pessimistic chatter. It all gets in the way of seeing the opportunities that can arise during challenging times like the one we’re in.

But if you’re someone who sees the big picture, you might want to keep reading. There might just be a unique investment opportunity right under your nose.

A Brief History of the Rental Market

Before jumping into the opportunity, it might be helpful to understand how we got here. The modern rental market started to take shape in 1992 when the failed NDP government instated a rent cap on homes built before 1992. The idea was to avoid irrational rent hikes by setting an allowable yearly increase, typically between 1% and 3% based on economic conditions. The development of purpose built rental projects slowed down shortly thereafter.

Things only got worse from there. Kathleen Wynne introduced the Rental Fairness Act in 2017 which stipulated that all rentals, regardless of when they were built, were now subject to a cap. Very fairly, investors questioned why they would subject themselves to the government’s rent control policies.

If they could only increase rent by 2.5%, and costs are going up anywhere between 10-20%, how could they possibly make money? Sure enough, tons of purpose built apartment building projects were either paused or cancelled leaving a huge hole in Ontario’s rental inventory.

Fortunately, Doug Ford’s government struck down Wynne’s act the following year. But it was too late – the damage had already been done. Investors took the unstable housing market as a sign to avoid long term rental projects indefinitely.

The Current Rental Market

To put it simply, there just aren’t enough rental units in Ontario. Demand fair outweighs supply. A report by the Building Industry and Land Development Association (BILD) confirmed this. Here are some key stats that illustrate this:

• In the GTA, the number of renters grew 3 times faster than the number of owners over the last 10 years.
• 90% of GTA purpose built rentals were built more than 40 years ago.
• More than 300,000 rentals are needed in the GTA in the next decade.
• Home ownership has dropped from 69.2% in 2011 to 65.8% in 2021 and is expected to fall further.

There are a lot more stats just like these, and they all tell the same story: the rental market is red hot, and it’s only getting hotter.

The Silver Lining For Individual Investors

This is a great time to invest in a rental property if you can make it work. Yes, rates are high. But even if your monthly carrying costs are slightly more than what you’re charging in rent, it’s still a great long term investment. Demand is high and developers don’t want to touch rentals making this an ideal time or individual investors to step up to the plate.

Don’t fall for the noise. Look at this time as an opportunity. And remember that real estate is always a good investment. All you have to do is reach out to a professional and ask for some advice.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca