Home flipping constitutes a small fraction of residential sales and flippers’ profits are likely modest or non-existent
The narrative that real estate investors, particularly those flipping homes, are inflating house prices has gained traction in Canada. This belief has prompted policy responses, including a federal measure effective January 1, 2023, which taxes profits from properties sold within a year as business income. The B.C. government is following suit with a home-flipping tax to be implemented in January 2025.
Home flipping — purchasing properties with the intent to quickly resell in a hot market — can lead to price volatility and impact housing affordability. Research shows that in overheated markets, flipping can drive prices higher and create instability. However, flipped properties can depress prices in a cooling market, as flippers often focus on distressed assets sold below market value.
Statistics Canada has so far only released data on home flipping in British Columbia, with results from other provinces expected in the future. Even this partial picture suggests Canadians may have been misled about the scale of the issue. Flipping constitutes a small fraction of residential sales, and flippers’ profits — once transaction costs, taxes, and fees are accounted for — are likely modest or non-existent.
Statistics Canada also reported that less than two per cent of B.C. homes sold in 2021 were held for six months or less, suggesting that U.S.-style frequent flipping is even more infrequent in Canada. Urban centres like the Vancouver Census Metropolitan Area (CMA) saw slightly higher activity, with 3.2 per cent of homes resold within a year. Condominiums were the most frequently flipped, at four per cent, compared to 2.8 per cent for single detached houses. The median ownership duration of condos in B.C. is 5.9 years — far shorter than the 13.5-year median for single detached homes.
Despite public perceptions, Statistics Canada’s data does not portray flippers as exploiting the housing market for extraordinary gains. Properties sold within a year of purchase in 2021 had a median acquisition price of $565,000, compared to $610,000 for other transactions, indicating that flippers often target undervalued homes.
Statistics Canada also found that the median price of all residential properties in B.C. rose by 18 per cent from 2020 to 2021. Thus, the economic profit for flippers — defined as the difference in price appreciation between flipped and non-flipped properties — was a mere two percentage points, hardly enough to drive broader market trends.
Canada’s situation, however, is vastly different. A two percentage point difference in price appreciation between flipped and non-flipped properties hardly constitutes a crisis. In fact, flipping may be more of a symptom of rising prices than a cause.
Over time, data from Statistics Canada has debunked several housing market myths — about foreign buyers, investors, immigrants, and now flippers — purportedly driving Canada’s housing affordability crisis. The underlying issue remains a persistent imbalance between supply and demand.
To tame the housing affordability dragon, Canada must build substantially more homes to address its chronic shelter deficit. Flipping is but a minor subplot in the broader narrative of Canada’s housing challenges.