British Columbia has a particularly high prevalence of buyers buying properties in groups of three or more, according to a batch of data recently released by the Canadian Housing Statistics Program, part of Statistics Canada. Newcomers to Canada are particularly active in buying high-end real estate in groups.
“We were very interested to know that [group buying] is correlated with high-priced markets, such as British Columbia,” said Jean-Philippe Deschamps-Laporte, head of CHSP.
These are not multi-generational partnerships, he adds, like when parents help their children enter the real estate market by adding their name to the title. These are individuals with a median individual income of $48,200 who shop as a group, bringing their median total income to $174,000. The data is based on a review of buyer behaviors in British Columbia from 2018, the most recent set available. The report includes differences by gender, number of buyers in a sale, family type, first-time home buyers and immigration status.
“These are not necessarily high-income people, but together, once you add up the income of this group, it leads to a higher total income figure than those who buy as a pair,” said Deschamps- The door.
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Ryan McKinley, Senior Director of Mortgage Development for Vancouver City Savings Credit Union (Vancity), has spent the better part of 20 years working in the lending business, and about 10 years ago they started offering the “Mixed Mortgage”, specially designed for group ownership. This product emerged in response to Vancouver residents entering into condominium arrangements on their own, due to soaring real estate prices. The condominium mortgage has only grown in popularity with both relatives and non-relatives.
“I don’t have specific numbers on the increase, but anecdotally we get more and more inquiries over time. By necessity, many people have a goal of home ownership and as soon as ‘they realize it’s going to be hard on their own, they start looking for other avenues to afford it,’ explains McKinley.
The most common concern about joint ownership is that the parties not only share the title deed, but also the mortgage. Although they may each have separate mortgage terms with the blended mortgage, such as their amortization period, each is responsible for all of the debt. This can become a problem if a person loses their job or becomes ill. Though he’s seen deals end due to divorce, McKinley hasn’t seen condos unravel because one party stopped making mortgage payments.
“I personally don’t follow these things, but I would usually be made aware if something like this happened, and I haven’t seen it,” McKinley says. “You also have more people involved than if you only had one person on the mortgage, where it’s all down to that one person. When you’re a co-owner, there are multiple people, so even if something happens and one person goes out, there’s often more financial strength in a group.
And even when people got divorced, these condos managed to work out, he says.
“The dissolution of a marriage is something that is discussed at the beginning, anyway, but even if it is not, that is when we come together and find out. In the last situation, we managed to do this so that the other spouse could be redeemed and the remaining spouse would take over. We had to modify things and so on, but it worked as it should.
The co-ownership mortgage is one step in the process and a legally binding co-ownership agreement is another. And because co-buyers are tied to each other’s circumstances, that means they must also have appropriate insurance coverage, McKinley says.
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“A lot of people don’t know this, but it’s especially important when you’re talking about tying yourself financially to related or completely independent people, making sure everyone is properly insured…it’s important that everyone is on the same wavelength.”
Condominium ownership generally falls into three categories, he says. There are the traditional partnerships between parents and their adult children, where the parents usually do not live in the same house but act as investors.
“Because the down payment is a big investment now, rather than just giving their kids a big down payment that family members own together, which gives the kids a head start in getting into the market and also as a potential investment for parents. So it’s happening.
The other category is friends getting together, like two couples buying a house or a duplex or two singles buying a two-bedroom condo. And then there are unrelated people buying properties. Some of these condominiums can be found on the Multiple Listing Service (MLS), where one party sells their share of the title. McKinley is currently working on such a purchase, where three independent people had long co-owned and now one wanted to sell.
Not all situations lend themselves to co-ownership, he adds. For example, this is not a mortgage designed for large groups of 15 or 20 investors. In that case, they should probably form a corporation, he says.
Condominiums are particularly popular with immigrants, who pool their resources and purchase properties that are generally more expensive than those purchased by groups of non-immigrants with the same income. Immigrant co-buyers often buy in urban areas where property values are higher.
“As we see this trend [for group buying] be more prevalent in British Columbia, this is particularly the case for immigrant buyers,” said Deschamps-Laporte. “And that’s the very interesting angle. There is a lot of talk about immigrants and their role in the housing market, and the choices immigrants make that are sometimes different from those non-immigrants make.
“And ultimately what this tells is partly a story of integration, of a preference for brick and mortar over other types of financial assets.”
