The rise of multiple-property owners
Growing cohort overtakes first-time homebuyers in T.O. real estate market
In a September video posted on Instagram, Sahil Jaggi stood outside a brick house, one of more than a dozen homes he owns in Toronto, and talked about profits.
The real estate investor explained to viewers that he spends about $3,000 on the property each month while reaping in around $7,000 in rent. The home, Jaggi later told the Star, is leased by two groups of students, who then sublet two basement spaces.
“This property I’m going to keep for a long term, because it’s a great cash cow,” he says in the video.
Jaggi is among a growing cohort of people who own multiple properties within the city, a group that has in recent years overtaken first-time homebuyers as the biggest slice of Toronto’s home-purchasing market, according to a recent report by Teranet.
As recently as 2016, Teranet — Ontario’s title search and registration provider — found the most common kind of person purchasing a Toronto home was a first-time buyer. But from 2016 to 2018, things changed.
Multiple-home owners — a group that includes real estate investors, as well as those who own a vacation home like a cottage — became the most common kind of homebuyer throughout the city. This year, between January and August, Teranet found that multipleproperty owners made up 29 per cent of Toronto purchases, nudging first-time buyers at 28.5 per cent.
And across the country, Equifax Canada has noted a multiyear surge in people with more than three mortgages, with a 7.7 per cent increase between June 2020 and June 2021.
Experts say it’s hard to identify the exact impact of the shift, and several cautioned against drawing a straight line between increased investment activity and skyrocketing prices, pointing to other factors such as a growing population and low interest rates. While some believe investors are taking away supply from prospective homeowners looking for their primary residence, others say they have the potential to provide needed rental supply.
Jaggi has been snapping up homes in the city for more than a decade. He owns 17 properties — with one closing this fall — most of them single-family homes, and all but one in Toronto. He eyes older, smaller houses, often bungalows on larger parcels of land; he renovates some, builds onto others and splits some into multiple rentals. Jaggi told the Star he only resells when he’s certain he’s “juiced out” the maximum financial value from the property.
He’s open about the handsome profits he’s made from buying up Toronto homes. He believes his current lot is worth $23 million, and offers examples such as a home near Yonge and Finch that he says he bought for $700,000, put around $800,000 into, and sold for $2.6 million.
“If you’re buying something that’s (undersupplied), which is detached homes, in the long term, you’ll do better,” Jaggi said in an interview.
He isn’t blind to the imbalance that can create. It’s easier for an investor like him to buy an additional property than for a firsttime buyer to purchase their own home, he said, noting that amassing equity through properties meant his money grew faster than simply saving.
“It doesn’t surprise me,” he said of the growth in investor activity in recent years.
But he suggested governments could implement better policies to address concerns with housing affordability and supply. Governments were ultimately responsible, he argued, for any negative consequences of the increased real estate investment activity seen in the last few years.
“Why wouldn’t we take that opportunity? It’s not up to the people to stop their growth as businessmen. It’s up to the policies to protect people, and to protect affordability.”
The value of homes has soared in Toronto and beyond, with Royal LePage recently reiterating its prediction for a 16 per cent annual increase on prices. If true, home prices across Canada will have risen by 33 per cent between June 2020 and the end of 2021, the Star has reported.
That escalation has put pulling together a down payment increasingly out of reach for many would-be first-time homebuyers, as the gulf between incomes and home prices has grown. A report to city hall in 2019 noted the median household income in Toronto grew 30 per cent from 2006 to 2018, as home ownership costs grew by 131 per cent.
Experts say the exact degree to which investors have affected that growth is unclear. John Pasalis, president of Realosophy Realty, presented it as a sort of chicken-or-egg question: did the surge in investors lead to rising home prices, or did rising prices attract more investors?
Either way, he sees the increase in multi-home ownership as yet another challenge facing hopeful buyers searching for their own home, particularly in the competitive singlefamily house sphere.
“It’s taking inventory out of the market for people who just want to buy a home, and raise a family, and be there long term,” Pasalis said.
Like Jaggi, Pasalis noted that investors were often attracted to average or below-average homes where they saw potential to increase the property’s value. With more capital at their disposal, Pasalis said investors could often be more aggressive in bidding wars.
“The investor outbids the two or three other buyers who are competing for this nice home — or slightly below-average home that needs a little more work — that’s actually attainable,” he said.
Jessica Bell, housing critic for Ontario’s opposition NDP, believes the trend toward more multi-home ownership is concerning. “When investors can and are outbidding first-time homebuyers for homes, it means that first-time homebuyers are relegated to renting, and it drives up rent prices for everyone overall,” she said.
Both she and Parkdale-High Park city councillor Gord Perks believe that many renters see owning a home as a pathway to stability, with Bell noting that it eliminates worries about being evicted — which can happen in situations such as a landlord selling or wanting a unit for their own use. Bell offered the example of a family with young children. If they owned their home, she said, they could be sure those kids could stay in a certain school and make friends in their area. The answer, Perks said, isn’t simply in making home ownership more attainable, but in creating better quality and more stable rental housing, including social housing like co-ops. When more homes go to multi-property owners, he said that wealth further concentrated. “As long as where we live is a market commodity, people will speculate on it, and get rich off of it.”
Earlier this year, a plan from a Toronto-based condo developer to buy up $1 billion in singlefamily homes to use as rental properties was met with outrage that a company could be profiting off Canada’s ongoing housing woes and further limiting the supply for first-time buyers.
However, Avery Shenfeld, chief economist with CIBC Capital Markets, says while investors buying up homes then leaving them empty could be a wound to supply, if they are leasing them, he believes it can address a different issue by creating needed family-sized rental options.
“They’re helping serve another important market, which is the market for housing for those who can’t get a down payment together,” Shenfeld said. “Many Canadians will find that renting is their only option, and having some single-family houses for rent is an important niche in that market, which is, at this point, very tilted toward smaller units that aren’t suited for a family.”
As of the last census report, slightly more than half of Toronto households owned their homes — 53 per cent versus the 47 per cent who rented. Of homeowners, 61 per cent lived in single-detached, semi-detached or row houses, while 87 per cent of renters were in apartments.
Realtor Sohail Mansoor says he first invested in Toronto’s condo market when he moved out of his first owned home. Instead of selling it, he decided to rent it out. Over the years, he amassed more condos, and eventually sold off two to afford a house of his own. He told the Star that he and his wife currently have one investment condo along with their home.
He noted there was some variety in investment situations, including instances of adults buying homes for aging parents or parents buying homes for their kids. The appeal to investment properties, as Mansoor sees it, was that it felt more certain than putting money elsewhere.
“There’s what we feel is a secure investment and something that’s stable for the long term, as opposed to potential volatility in the stock markets and other things,” he said.
Still, he’s seen clients on the hunt for their own home in Toronto who’ve grown frustrated, he said, feeling their options in the market were just too limited to lock something down.
“I definitely think (increased investment) contributes to the issues at present with the lack of housing,” he said.
He believes there’s more to the equation, though, noting some older properties are in a state where they require extensive renovations to be in livable shape. Not everyone has the time or money to do those kinds of renovations, he said, particularly someone who barely eked out a down payment.
“I think the real issue is that there is a lack of properties, period. And there are a lack of properties that appeal to enduser buyers,” he said.
Next year, Toronto will see the introduction of a new vacancy tax, meant to add a financial penalty for anyone who leaves a property unoccupied for more than six months in a year. The province has encouraged models like co-ownership to get more people into the market.
The federal government promised a slate of housing moves in the last election, from a tax on homes flipped within a year to reviewing the tax rules for “large corporate owners and speculators trying to amass large portfolios of Canadian rental housing” with hopes of curbing profits.
NDP critic Bell believes all levels of government need new policies and rules to address Toronto’s housing affordability crisis, calling for more protections for renters and new tax measures on investors.
Jaggi agrees with the latter — saying he doesn’t understand why investors like him aren’t taxed more, and suggesting officials impose increasing property and land transfer taxes for each extra home.
He believes real estate investors can play some positive roles in the market, arguing that splitting a single-family home into multiple rental units could bring more density into neighbourhoods. But here, too, he took aim at existing policies and processes — saying that anyone looking to split a single home into multiple units ran the risk of getting caught in protracted approval processes.
If the city wanted to help with affordability, he and Shenfeld both pointed to zoning rules and argued that officials should pay more attention to boosting overall housing supply.
“(Investors) are not the only bad guys here,” Jaggi said.
“It’s not up to the people to stop their growth as businessmen. It’s up to the policies to protect people, and to protect affordability.” SAHIL JAGGI REAL ESTATE INVESTOR