Real Estate Investing In Ontario

Real Estate Investing In Ontario

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Investing in Canada is an interesting proposition due to the diversity and number of provinces and territories that spread across our country. These provinces create several compelling opportunities since what works in one province might not necessarily work (or be permitted) in another. Familiarizing yourself with these province standards, and how they could differ from those of other provinces or the nation as a whole, should be the first job of any investor. In this post, we’re going to explore our largest province—Ontario—and take you through some of the opportunities and challenges that exist for the Canadian real estate investor. Investing in Ontario can be beneficial for several reasons, and we’re going to take you on a tour to prove why that’s the case.

Table of Contents - Real Estate Investing In Ontario

Demographics of Ontario

Before diving into more detail, it’s important to gain an understanding of the bigger picture of Ontario, starting with its population and people. As was previously mentioned, Ontario is far and away Canada’s largest province by population, containing almost 40 percent of the population of the entire country. Additionally, since it’s not the largest province by land area, that means that it’s one of the country’s densest areas as well. This means that some urban areas exist in Ontario with opportunities that might not necessarily be there in every part of the country.

Ontario is also a place that sees many people come and go—while the province enjoys one of the highest population growth rates in all of Canada, it has also historically seen one of the largest interprovincial emigration rates in the entire country. Much of its growth is due to immigration from outside the country—more than half of Toronto’s population was born outside of Canada, for example, but 97 percent of Ontario’s residents still speak English, indicating a strong willingness by newcomers to settle into their new home.

The demographics of Ontario suggest a province that is full of newcomers and long-time residents alike, creating a dynamic area that could be ripe for the right real estate opportunities. The city of Toronto is the linchpin of the Golden Horseshoe, the biggest stretch of populated areas in the entire country: a bustling urban metropolis with a lot of potential thanks to its high population that’s always evolving. With all that said, if you’re an investor looking for a dynamic marketplace, then investing in Ontario might just be the ticket for you.

Income statistics of Ontario

When evaluating the real estate potential of any area, it’s important to take a look at the income statistics there. This can help you figure out which level of property you could be looking into. For example, you don’t want to be stuck with a lot of affordable units in an area where people might make more money and be looking for something a bit more upscale. In the case of Ontario, income statistics can be fairly revealing. The entire province’s economic output is roughly equivalent to that of the entirety of Vietnam, so there is some power packed into this area of Canada.

Residents of Ontario are also slightly better off than your average Canadian—the median after-tax income here for families of two persons or more is about $73,700—just over the median income of $71,700 for all of Canada. This might be a good place to look into if you’re interested in economical investments that can also accommodate people who make a bit more than average. Investing in Ontario can mean that you’re acquiring several properties that can appeal to people across the income spectrum and feel reasonably confident that you can appeal to most or all of them.

Taxes in Ontario

Another factor that you should consider before investing in Ontario (or any province) is the tax rates there. Ontario is one of the lowest-taxed provinces in the entire country, surpassed only by Nunavut and British Columbia, which could help inform your investing decisions. Rates are lower than Canada’s average in every income bracket, so it’s important to factor this into your decisions. Additionally, sales tax rates here are right in the middle of the pack, if not towards the lower end, so you can feel reasonably confident that your pool of potential of buyers and tenants is not being excessively taxed—which could, of course, influence their real estate decisions (and yours).

Average home costs

When looking into investing in Ontario, it helps to have a good understanding of what prices are like across the province. Home prices in Canada fluctuate over time, meaning the different provinces ebb and flow in popularity and price when compared with each other. Since Ontario has so many different areas, including some of the most compact urban areas in the country, prices can fluctuate widely. You can be sure that prices for homes and condos will be quite a bit higher in Toronto than in more rural areas of Ontario, for starters. Across the board, prices in Ontario have grown significantly over the last year, even in the face of uncertainty over the coronavirus.

Even as Canada has seen significant increases in price across the entire country, Ontario has outpaced even that brisk rate of growth. Additionally, Ontario’s rents are some of the highest in the entire country. Out of the top 33 most expensive rental markets across the country, 16 of them are located in Ontario. This can make investing in Ontario rental properties an enticing proposition, especially in urban areas, as many investors can rest assured feeling that their investments will be reasonably expected to perform for them.

Ontario market snapshot

Several factors contribute to a province’s real estate outlook, and Ontario is in good shape on many of these metrics. The Bank of Canada’s reduction of interest rates by a full point was done with the intent of creating much more demand in the market. When this happens, homeowners can, of course, borrow more money at a lower rate, which can drive up prices, which is, of course, good news for sellers, but also buyers. Buyers can achieve lower rates that can give them real savings over the long term of their borrowing period. However, this should be coupled with the understanding that Ontario’s workers are currently experiencing wage growth that is lower than in any other province.

Inventory is typically one of the biggest challenges facing Ontario homebuyers, especially in areas like Toronto. The meteoric population growth that can occur here due to immigration has led to a reduced inventory in homes for sale, which of course will drive prices up. This can be good or bad news for the Canadian real estate inventory, depending on how you look at it. Ontario’s population growth isn’t going anywhere anytime soon—the Ontario Ministry of Finance predicts it will increase by 38 percent by 2046—which could bode well for the long-term real estate market. Sellers can likely expect prices to only climb over the coming years and decades.

To be clear, COVID-19 has had an impact on the market, at least in the short-term. Buyers and sellers alike are currently hesitant to dive back into the market and treat it as business as usual—because it isn’t. We are all working together to navigate these uncertain waters, but the Ontario housing market projects to rebound nicely in the long-term. It will be a situation worth monitoring for those interested in investing in Ontario in the immediate and long-term future.

The Toronto market

Toronto, the province and the nation’s biggest city by population, is one of the meccas of Canadian culture and life. It is always a popular destination for immigrants to the country, so you know that there will always be a lot of dynamism and activity here. The city boasts some of the most popular sports teams in Canada, including the Maple Leafs and the Blue Jays, as well as the Hockey Hall of Fame. It also boasts some of the country’s premier performing arts venues and a host of restaurants and shopping options that reflect its status as a booming city populated by a diverse and exciting population. Toronto has historically been a popular destination for renters and buyers alike, so it can be a great destination for those looking at investing in Ontario.

The Toronto market has stalled somewhat in the face of COVID-19, but it still holds a significant amount of promise. Home prices in Toronto have seen a slight dip in recent months after a long period of climbing, so anyone holding real estate in Toronto is still in good shape despite a short downturn. This downturn could continue into the summer, but it should still keep investors in the black. This could also lead to more demand in the market once restrictions are lifted and commerce is opened back up since a lot of buyers and renters will have been sitting on their money for a period and will be ready to dive into the market.

Currently, Greater Toronto boasts some of the highest home prices in the entire country, with average prices for home purchases being around $865,000. The city’s rental market is no less competitive—the average one-bedroom apartment rents for around $2,300 a month and two-bedrooms costing around $2,900. This can be a double-edged sword—real estate investors can rest assured that they will likely make money on a purchase in Toronto, but the city is unaffordable for many of the potential buyers and renters who you’d be seeking to appeal to.

The Ottawa market

Canada’s capital city is nestled near the eastern end of the province and boasts such sights as the Rideau Canal, Chateau Laurier, the National Gallery of Canada and the Canadian Children’s Museum. As in most provinces, there are also a host of sports teams to follow, from the NHL’s Senators to the CFL’s Redblacks. The city also hosts 130 embassies from nations around the world, giving the city a decidedly multi-cultural flair that makes it a very popular destination for younger generations interested in higher education as well—the city has two of the most popular universities in the entire country in Carleton University and the University of Ottawa.

The city is a magnet for those interested in working in the Canadian government and has the 10th most expensive rental market—a one-bedroom apartment can typically go for around $1,600 a month, while a two-bedroom will likely run around $2,100. Home purchases in Ottawa are quite a bit more affordable than they are in Toronto, for example—the average home price in Ottawa as of March 2020 was about $472,000. However, home prices in Ottawa have climbed faster than those in Toronto over the past year, which could reveal Ottawa as a real area of opportunity if you’re considering investing in Ontario.

As with Toronto, Ottawa’s real estate market has stagnated a bit in the face of COVID-19, and understandably so. Both buyers and sellers are hesitant to venture out and pursue something as intricate as a home purchase, and they can hardly be blamed. However, as with Toronto, most experts are predicting a flood of people back to the market once restrictions are lifted, eager to finally make a purchase or rental, so Ottawa remains very much in play for those looking to venture into investing in Ontario.

Summary

Investing in Ontario is an attractive option for many Canadian real estate investors due primarily to the province’s high population, low taxes and potential for growth. Its dynamism makes it a magnet for many key demographics, so investing in real estate could make a lot of sense here for the right investor. The province is the gateway to many new Canadians every year, making for a high turnover that could bode well for the discerning real estate investor, and its status as the cultural and social hotbed of the entire country makes it a market that is almost sure to see steady and sustained growth. To network with other Ontario real estate investors, join the Ontario Real Estate Investors Association.

Real Estate Investing Ontario


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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.