Younger investors driving secondary, tertiary markets

Investment property purchases are fast becoming the domain of millennials and Generation Z, who see more value in secondary and tertiary markets.

As a Royal LePage report showed, there’s a higher share of 18-35- year-old secondary property purchasers in Canada’s three largest cities than any other age group. According to Sherard McQueen, CEO of M5V Developments, unlike older, conservative homeowners, younger owners aren’t afraid of pulling equity out of their primary properties to buy at least one other home. Moreover, he says they’re particularly active in the Niagara region.

“They love the entire region from Welland to St. Catharines and Grimsby but especially Niagara proper. The entire region is connected by transport, too,” he said. “I think most investors are purchasing buy-and-hold properties as long-term rentals. In fact, if you look at Airbnb and Vrbo, there’s a dearth of inventory. A lot of young investors aren’t buying four- or five-bedroom houses because they don’t have the budget for it.”

Condos are their property of choice in the region because one-bedroom units that are roughly 500 sq ft could be had for as little as $350,000, which is unheard of in Toronto. The region is attracting new residents and, resultantly, seeing a proliferation of new builds for which mortgages can be carried on $50,000 salaries—also unheard of in Toronto.

“Young people love it in Niagara. People who are buying now were undecided pre-COVID, but a lot of them are moving out here and there is, quite frankly, a lot of activity in the region,” said McQueen. “There are a lot of restaurants with authentic cuisines, not just big box or chain restaurants, and Crystal Beach is very popular too. If you work from home and all your friends are moving out there, it makes sense to want to move there too.”

The City of Windsor fell on hard times following the Great Recession but it’s recently bounced back, and that resilience is writ large in its real estate market. Many young GTA-based investors have, for years now, set their sights on the city, particularly downtown and on the west side where home prices are lower, but they’ve drawn the ire of residents who believe they’re driving up the cost of housing for locals and who charge they don’t maintain their properties well.

“They’re probably as young as 25-35 and I think it’s because a lot of them are taking real estate investment courses that teach them the formula—you buy at X price, refinance and move on to the next one—so we have tons of people calling and messaging us, especially from the GTA, about the lower end listings,” said Deidre Ritsche, a realtor with Keller Williams Lifestyles Realty in Windsor. “For a long time, Windsor was the cheapest market but this is the reason that prices have doubled in the last four or five years. A lot of residents here are against this because the investors buy lower-end homes and student rentals and rent them out by the room, not taking care of the properties as our market continues inflating hugely.”