If you want to know how condo investors operate, CMHC has a new report for that.
It just released its 2015 Condominium Owners Survey (COS), and it’s stuffed with facts and insights on income property activity.
One key stat, for example, is the number of condo flippers (buyers who “anticipate holding their unit for less than 2 years”). CMHC estimates the number at just 8% of all condo investors. That’s markedly less than some housing bears would have us believe (which is exactly why hard data is so important; thank you, CMHC).
Below are some of the other mortgage-related highlights.
Propensity to Finance
53% of condo investors put a mortgage on their last purchased unit
That compares to 59% of all homeowners, per StatsCan
About 20% paid cash
Versus 11% for all homebuyers, says Mortgage Professionals Canada
20% of investors put down less than 20%
Since most lenders only lend up to 80% loan-to-value on rentals, most of these investors likely chose non-prime lenders, bought in a partnership and/or just flat-out lied (i.e., told the lender they’re buying an owner-occupied or second home property, which is fraud)
45% had a down payment of 20%+
Most condo investors (53%) took the faithful 5-year term
Interestingly, 18% took a term over five years
That’s almost4 timesthe ratio of all homebuyers combined
Given how high 7- and 10-year fixed rates are, this goes to show how some investors value consistent cash flow over upfront interest savings
This stat is also partly explained by the fact that 60% plan to hold their investment condo more than five years
Just 5% took a 1-year term or less
12% of investors who mortgaged their last condo chose an amortization period more than 25 years
42% took a 25-year amortization
31% went with less than 25 years
37% took a variable rate mortgage
45% picked a fixed rate
Compare that to the general population of recent homebuyers, where3 out of 4chose a fixed rate
Investors overall are clearly more comfortable with rate risk
12% chose a fixed and variable rate (i.e., a hybrid mortgage. This 12% is double the average for all Canadian homeowners.)
If you want all the details on this study, read more onCMHC’s website.