Statistics Canada recently published some data (from 2022) looking at investors in the condominium apartment market. Here is what they believe to be the share of condominium apartments used as investment properties in Ontario's 10 largest census metropolitan areas:

It's worth noting that this is after excluding condominium buildings where every single suite is owned by a single investor. This is/was most prevalent in London, and it's the result of there being property tax benefits to registering a condominium (individual unit assessments), even though for all intents and purposes it's a rental building (building in its entirety assessed).

The article goes on to rightly suggest that the prevalence of investors, and the way that condominiums are financed, could be leading to the construction of more buildings with smaller suites. Here's the proportion of new condominium apartments under 600 square feet by period of construction:

The unsurprising takeaway is that condominium suites have gotten smaller. In the 1990s, the average condominium apartment built in the Toronto CMA was 947 square feet. This is compared to 640 square feet after 2016. And the same thing happened in Vancouver, which went from an average of 912 square feet to 790 square feet.

Investor preferences certainly have something to do with this. But what the article doesn't specifically mention is that this phenomenon is also a direct response to rising build costs: making suites smaller was how the market tried to maintain some level of affordability. Put differently, imagine how expensive new condominiums would be if the average size was still 947 square feet.

But there are obviously limits to this. I was with one of our architects the other week and he made an interesting comment to me. He said, "Brandon, before when build costs used to go up and things got less affordable for consumers, we could just make the suites smaller to offset the impacts. But I don't see how we can go any smaller now. We've reached the limit."

This is one of the reasons why I think this downturn is going to ultimately be a good thing for Canada's housing markets. It's a reset. It's forcing everyone out of complacency and, hopefully, it means that when the next cycle begins we'll be starting from a better foundation.