1. Introduction
As interest rates continue to rise, small-time landlords in London are facing increasing pressure to sell their properties. This shift in the market dynamics is forcing many “mom-and-pop” investors to offload their real estate holdings due to escalating mortgage costs. This trend mirrors challenges seen in other expensive markets across Canada.
2. Impact on Small-Time Landlords
The rise in interest rates has significantly affected first-time homebuyers, and now it is starting to impact small-time landlords. Many of these landlords are finding themselves in a position where their rental income is insufficient to cover the higher costs of their mortgages, particularly upon renewal.
3. Historical Context
Before the COVID-19 pandemic, London’s housing market was notably attractive for investors. Compared to areas closer to the Greater Toronto Area, property prices in London were relatively lower. The low interest rates and pre-pandemic home prices made investment opportunities appear highly promising.
4. Changing Market Conditions
The landscape began to shift in 2022 when the Bank of Canada started raising interest rates to combat inflation. This change has had a significant impact on those with variable mortgage rates, leading many to reconsider their investments.
Jeremy Odland, a broker with Royal LePage Triland Realty, explains, “For people who chose to go with a variable mortgage rate, there are many who are deciding to exit because their mortgage payments have often doubled. They’re having to cover those extra costs each month out of their own pocket because they can’t raise rents by that much.”
6. Broader Implications
The trend of small-time landlords selling off properties could have wider implications for the rental market. Kahlan Nottal, a manager with Forest City Property Management, notes, “With the housing shortage, this creates a whole new problem. Properties that were previously available for rent are now being sold, leaving those in need of rental accommodation with fewer options.”
Nottal’s company manages approximately 125 properties, and he has observed around nine properties listed for sale in the past year due to owners’ inability to afford mortgage payments.
7. Conclusion
The rising interest rates are reshaping the housing market in London, particularly affecting small-time investors who are finding it increasingly difficult to manage their rental properties. As these landlords exit the market, the local rental landscape may experience further strain, exacerbating the existing housing shortage.
Stay tuned for more updates as the situation continues to develop.
