A report says the ongoing correction in the Canadian housing market is shunting aside two types of home buyers.

These are first-time purchasers and foreign buyers, who are feeling the pinch from a combination of factors, ranging from higher interest rates to government housing policies.

And into the void created by this calming market comes in a class of winners.

“This may prove a boon to investors,” Dexter Realty said in its report Monday (August 8).

The report was prepared by Kevin Skipworth, who is the Vancouver realty company’s partner and managing broker.

Investors refer to people “buying homes for rental income or appreciation”.

The report noted that investors “traditionally” account for about 20 percent of real-estate transactions in Metro Vancouver.

Sales have slowed down following four interest rate increases made by the Bank of Canada starting in March 2022.

From the historically low level of 0.25 percent since the COVID-19 pandemic began in 2020, the central bank has brought its interest setting rate to 2.5 percent.

The report noted that determined buyers, including those who plan to live long in their properties, are not going to be deterred by the higher mortgages.

The paper pointed out that the average five-year fixed-rate mortgage at Canada’s six big banks has increased by “just 1.4% in the last six months”.

However, the cooling market has produced losers.

“During the first half of this year, the number of B.C. first-time buyers fell 46% compared to the same period last year, accounting for just 4,426 purchasers,” Dexter Realty stated.

It cited the federal government’s mandatory stress test as a “key reason”.

It “requires buyers to qualify at an unrealistically high five-year mortgage rate that many first buyers have difficulty meeting”.

“Instead of buying, more than 4,000 will remain renters,” Dexter Realty stated.

Buyers need to pass the stress test, which is the higher of their contract rate plus two percent or the Bank of Canada’s mortgage qualifying rate of 5.25 percent.

With fixed rates now over four percent, this means that buyers applying for this type of mortgage will have to qualify at a higher rate than the central bank’s qualifying mark.

In the report, Dexter Realty noted that foreign home buyers in Metro Vancouver “may have accounted for 6% or more of all sales” before a 15 percent foreign buyer tax was adopted in 2016.

The tax has been increased and it now stands at 20 percent of the market value of the property.

The Vancouver realty stated that foreign home buyers “now make up only 1% of Metro Vancouver transactions”, based on figures from the provincial finance ministry.

In addition to the 20 percent tax in the province, the federal government is also bringing in a two-year ban of foreign purchases in January 2023.

“So, investors who are purchasing investment condominiums now are enjoying lower prices, zero competition from global investors, a captive audience of renters and rising rental rates,” Dexter Realty noted in the report.

Moreover, “Investors realize that, despite all the government chest thumping over increasing the supply, Metro Vancouver housing starts as of July were down 23% from a year earlier and the new strata shortage is getting worse.”