While Canada’s real estate market has been facing cooling pressures due to rising interest rates and affordability challenges, home flipping remains a thriving activity among investors. Real estate flipping, which involves buying properties with the intent to sell quickly for profit, continues to make up a significant portion of home sales across major Canadian cities. In 2024, flippers showed resilience, adapting to market conditions and leveraging policies that unintentionally favored investor activities.

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Flipping Trends in Canada

In the second quarter of 2024, approximately 2.42% of homes sold in Canada were flipped, meaning they were bought and resold within 12 months. This rate was only slightly below the record high of 2.61% observed in early 2023. Notably, 50% of these homes were flipped within six months, underscoring the speed and efficiency with which many investors are capitalizing on the market​.

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Flipping activity has particularly surged in cities like Calgary, where the share of flips hit 6.54% in Q4 2023, the highest in Canada. Meanwhile, in cities like Vancouver and Toronto, flipping rates have been more erratic but remain significant. In Q4 2023, Vancouver saw 2.87% of home sales involving flipping, while Toronto’s numbers have also fluctuated based on speculative investments in condos and homes​.

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The Role of Interest Rates and Policy in Flipping

A key factor that has supported flipping activity is the declining mortgage rates. In 2024, as the Bank of Canada began reducing rates to stimulate the broader economy, many real estate investors seized the opportunity to leverage cheaper financing. Lower borrowing costs made it easier to acquire properties and secure favorable margins, despite overall housing market cooling. Historically, lower interest rates are linked to economic uncertainty, but for investors with access to capital, these rate cuts have created opportunities for profit​.

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Additionally, investor-friendly policies have inadvertently supported flipping. For example, even though Canada introduced tax reforms in 2023 aimed at curbing speculative activity by taxing flips as business income, the impact of this measure has been minimal. Investors, particularly those with substantial capital, continue to engage in flipping activities as the higher taxes are seen as manageable within their business model​.

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Flipping Across Major Canadian Cities

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• Calgary: has led the nation in flipping activity for the past decade, with rates reaching 6.54% in Q4 2023. Despite economic fluctuations and cooling measures, Calgary’s flipping market has been resilient, fueled by strong population growth and investor confidence in the city’s housing prospects.
• Vancouver: flipping rates have fluctuated due to high housing demand and price volatility. In 2023, Premier David Eby introduced a flipping tax to combat speculative activity, but flipping still comprised 2.87% of total home sales by Q4 2023. Despite the tax and cooling measures, Vancouver remains a hotspot for investors​.
• Toronto: housing market has long been dominated by speculative investors, particularly in the condo market. Flipping in Toronto has fluctuated, but as interest rates fall and policy incentives remain, investors continue to find profitable opportunities​.

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Impact of Tax Reforms on Flipping

Canada introduced a new tax rule in 2023 that defined any property sale within 12 months as business income rather than capital gains. This tax reform was aimed at reducing speculation and cooling the market. However, its impact has been limited. While it increased the tax burden for flippers, the relatively high profitability of flipping and the access to low-cost capital have allowed many investors to continue thriving.

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Furthermore, the tax reforms may have encouraged faster flips, as investors sought to minimize exposure to changing market conditions and maximize their returns. With 50% of flipped homes sold within six months, investors have found ways to adapt to the evolving regulatory landscape​.

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Flipping and the Broader Housing Market

The persistence of flipping activity highlights a broader challenge in Canada’s real estate market: the growing gap between traditional homebuyers and investors. As flipping continues, it has an upward pressure on housing prices, exacerbating affordability challenges for first-time buyers. Investors, who are less sensitive to employment trends and more resilient to economic shifts, are better positioned to take advantage of market conditions, often outbidding regular homebuyers.

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This ongoing investor-driven demand contributes to a self-perpetuating cycle: as housing prices rise, flipping becomes more profitable, attracting even more investors into the market. While this may benefit certain sectors of the economy, it raises concerns about long-term affordability and housing accessibility​.

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Conclusion

Despite efforts to regulate and cool Canada’s real estate market, flipping activity remains near record highs. Investors, buoyed by falling mortgage rates and investor-friendly policies, continue to find opportunities to profit from quick sales. The resilience of flipping in major cities like Calgary, Vancouver, and Toronto underscores the ongoing challenges in balancing speculative investment with broader housing market stability.

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This trend points to the need for more targeted policies that address the root causes of speculative investment, without disproportionately impacting regular homebuyers. As Canada’s real estate landscape continues to evolve, the role of investors in shaping housing demand will remain a critical issue for policymakers to address.

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Sources:

• Storeys
• Better Dwelling