News: Fractional Real Estate Investing & Parents Pay Kids Down Payments

In this week's Industry News (Week of 18 Oct 2021).

Fractional real estate investing gets young people into the property market | The Globe and Mail

A back door has opened for young adults who want to own property, but find themselves priced out of the market. Fractional real estate investing on platforms such as BuyProperly and Addy allows you to own a small slice of equity in residential or commercial properties, such as apartments or business parks. You can’t live in these properties, but you can benefit if they’re sold later at a profit and receive a little rental income while you wait. You could also lose money if a property is sold for less than the purchase price. We see financialization in the growing number of people who own multiple properties. Why sell your starter home to move up when you can own two properties? Another example is a Toronto condo developer, Core Development Group Ltd., buying single-family homes to rent out. Canada Mortgage and Housing Corp. recently created a Financialization of Housing Lab to study the trend. With the benefits of residential real estate ownership becoming more well known, we are not surprised to see the emergence of fractional ownership opportunities. Technology is anticipated to play a key role in the evolution of this investment strategy and Konfidis is pleased to be a leader in Canada, supporting investors. See full article here.

Over A Quarter Of Toronto Real Estate Is Bought By Investors With Multiple Properties | Better Dwelling Investors are taking over Canadian real estate markets, especially in Ontario. Teranet, the private operator of the province’s land registry, looked at buyers from January 2011 to August 2021. Their analysis shows the largest segment of buyers is now multiple property owners. Armed with cheap money, these investors now represent one in four Ontario home buyers. The share is even higher in Toronto, where first-time buyers dominated the market just 10 years ago. The largest group of home buyers in Ontario already have at least one other home. Multiple property owners represented nearly 25% of Ontario home purchases in 2021. This was a new record, with their share of the market advancing 8 points over the past decade, about a 50% increase. That’s right, one in four Ontario property buyers already owns at least one other home. See full article here.

Parents gave their kids more than $10-billion in down payments in the past year. Is this the new normal? | The Globe and Mail Parents gave their children more than $10-billion in down-payment help over the past year, which was 10 per cent of total down payments over that period, according to CIBC data. Low interest rates, immigration and a pathological drive to own homes have mostly fuelled the housing market. Parental money is a final ingredient – the secret sauce. "Given the trend and the size of gifting, it is clear that this phenomenon is becoming an important factor impacting housing demand and therefore home prices in Canada," Benjamin Tal, deputy chief economist at CIBC World Markets, wrote in the report. CIBC found the share of first time home buyers getting parental help with a down payment didn’t change in the pandemic. However, cash stockpiled by families that maintained their income through the economic lockdowns of the past 18 months has found its way into down-payment gifts. The CIBC report says this may explain the recent increase in the amount of help provided. The question yet to be answered about down-payment gifts is whether we are at a tipping point for parental obligation. Is helping your adult children get into the housing market on its way to becoming the new normal? Must parents try to save for that, alongside their retirement? See full article here.

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Konfidis is pleased to share our weekly real estate investing industry news piece herein. We love connecting with our members. Reach out with your questions to hello@konfidis.com.

Shael Soberano, CFA Konfidis Inc. Chief Investment Officer

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