Value-driven buyers drawn to detached housing as affordability improved
TORONTO and KELOWNA, BC, Aug. 22, 2023 /CNW/ — Upward momentum served to mitigate the decline in detached housing values in the first half of the year, but average price fell short of last year’s levels in most neighbourhoods throughout the Greater Toronto Area (GTA), Greater Vancouver and the Fraser Valley, according to a report released today by RE/MAX Canada.
The RE/MAX Hot Pocket Communities Report tracked average price and unit sales activity in 82 districts within the Toronto Regional Real Estate Board (TRREB), Real Estate Board of Greater Vancouver (REBGV) and the Fraser Valley Real Estate Board (FVREB) and found a substantial reduction in detached values in the first quarter of the year triggered a surge in home-buying activity in the second, with supply shortages accelerating upward pressure on pricing. Yet, despite the rally in home-buying activity, close to 93 per cent of detached homes posted a decline in values in the first six months of the year, compared to the same period in 2022. Values were held to single-digit declines in almost 43 per cent of markets (35), including 18 in the GTA’s 416, six in the 905, nine in Greater Vancouver, and two in the Fraser Valley. Six markets bucked the trend, including four in Toronto’s central core neighbourhoods including Palmerston-Little Italy, Trinity-Bellwoods, Dufferin Grove (C01) at 16 per cent; Cabbagetown (C08) at 11 per cent; Rosedale, Moore Park (C09) at 4 per cent; and Banbury-Don Mills, Parkwoods-Donalda (C13) at 3.7 per cent. In Greater Vancouver, the median price in West Vancouver-Howe Sound rose 1.9 per cent, while the Gulf Islands climbed 13 per cent. Nominal declines were noted in Richmond Hill and Willowdale East, Newtonbrook East (C14) in the GTA, and Vancouver West in Greater Vancouver.
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Greater Toronto Area:
http://download.remax.ca/PR/GTAHotPockets/HotPocketCommunities2023_GTA.pdf
Greater Vancouver Area and Fraser Valley:
http://download.remax.ca/PR/GTAHotPockets/HotPocketCommunities2023_GVAFV.pdf
“Anxious homebuyers were quick to identify the bottom of the market and jumped in with both feet in the second quarter of the year,” says Christopher Alexander, President of RE/MAX Canada. “The short burst of home-buying activity clearly underscored the resilience of the housing market, but the lack of inventory available for sale curtailed any real momentum from building. Demand was greatest for affordably priced detached homes under the $2 million price point in Q2, with sales more than doubling between the first and second quarter in key GTA, Greater Vancouver and Fraser Valley markets. The uber-luxe market segment was also active, given the uptick in the number of homes changing hands over $7.5 million in the GTA. While the impetus was short-lived, it was not due to a lack of willing buyers.”
Not surprisingly, the RE/MAX Hot Pocket Communities Report found fewer detached homes changed hands year over year, with 95 per cent of markets surveyed reporting a downturn in home-buying activity. A handful of neighbourhoods outperformed the overall market, with the number of homes sold climbing in three neighbourhoods in the Greater Toronto Area including Bayview Village, Don Valley Village, Henry Farm (C15) at 21.4 per cent; Bathurst Manor, Clanton Park (C06) at 1.4 per cent and Alderwood, Long Branch, New Toronto (W06) at 9.3 per cent. Langley in the Fraser Valley also experienced an increase in sales of detached home sales, rising 7.9 per cent in the first six months of 2023, compared to the same period in 2022.
In many areas, a critical shortage of properties continues to hamper home-buying activity. Of the 60 markets in the GTA, nearly half (29/60) reported a decline in new listings in June 2023, compared to June of 2022. The greatest decline was noted in High Park, North Junction, Bloor West Village (W02), where listings were down 58.1 per cent, with just 26 properties available for sale. Other areas reporting double-digit shortfalls include Rosedale-Moore Park (C09), where the number of homes available for sale is down 43.8 per cent, and Leaside (C11), reporting a 40 per cent drop in listings with just 12 detached properties for sale. Inventory in Riverdale, Leslieville (E01) also declined, with just 17 homes listed for sale, down 26.1 per cent from year-ago levels. Suburban markets in the GTA also experienced a drop in listing inventory, with Halton Hills down 21.7 per cent to 137 units and Pickering down by 16.3, now sitting at 134 available properties. Twenty of the 30 tightest markets have an average price below $1.9 million.
In Greater Vancouver, nine of the 16 markets survey experienced a shortage of inventory in June, led by the Gulf Islands and Whistler, Pemberton, with new listings down 42.9 per cent and 23.1 per cent respectively year over year. Delta-South has dropped 16.9 per cent while Maple Ridge/Pitt Meadows declined 12.9 per cent from year-ago levels. North Vancouver is sitting with 11 per cent fewer new listings than in June of 2022. In the Fraser Valley, within Surrey proper, both Cloverdale and North Surrey have seen new listings drop off by 9.6 and 10.1 per cent respectively.
Affordability was the most significant driver influencing buying activity in the first half of the year, according to the RE/MAX report. Despite more challenging conditions, step-up buyers recognized an opportunity to make a move amid lower overall values in the GTA, Greater Vancouver and the Fraser Valley. Trade-up activity has pushed the share of detached home sales to 44.7 per cent in the Greater Toronto Area and 29.3 per cent in Greater Vancouver, both up slightly from one year ago. Detached market share in the Fraser Valley hovered at 37.5 per cent, down from 38 per cent in the first half of 2022.
“Today’s purchasers are focusing on value-added properties and communities, given new market realities,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Listings that offer a short or long-term benefit –be it a basement apartment that allows homeowners to offset their mortgage costs now or homes that hold long-term potential in a future renovation or sale to a builder—are most sought-after. Location, while still an important aspect, has been replaced by value and necessity. A growing number of buyers are willing to travel further afield to get the best bang for their buck.”
To illustrate, detached housing sales soared in York Region in the second quarter of the year, posting a 104 per cent increase over home-buying activity in the first quarter (2,328 sales versus 1,143 sales). Affordability was a major factor given detached properties in the 905 area code are priced significantly less than similar homes located in the 416 area code. Buyers in the 905 are also not subjected to the municipal land transfer tax of two per cent to 2.5 per cent implemented by the City of Toronto. As such, the region continues to experience solid demand, as evidenced by the uptick of nearly 18 per cent in overall housing sales in June (compared to year ago levels for the same period).
A recent survey, conducted by Leger, found that more than one in four Canadians (28 per cent) agree the land transfer tax has impacted their decision to participate in the housing market. The home-buying decisions of young Canadians are particularly impacted, with 40 per cent of Gen Z and 35 per cent of Millennials agreeing that the land transfer tax has played a role in their pursuit of home ownership, compared to 26 per cent of Gen X and 21 per cent of Baby Boomers.*
Three Toronto neighbourhoods have also benefitted from the trending. In Bayview Village, Don Valley Village, Henry Farm (C15), for example, sales were up 21.4 per cent with 142 properties changing hands in the first half of 2023, compared to 117 during the same period in 2022. Value-driven purchasers, drawn to the area’s bungalows and two-storey homes, generous lot sizes, and greater availability of inventory (61 new listings at the end of June) helped propel sales activity. The neighbourhood offers up the second lowest price in the central core at $1,954,568.
The central core’s most affordable and undervalued area, Bathurst Manor, Clanton Park (C06), has been a popular destination for young families seeking homeownership for years. With detached housing values hovering at just over $1.7 million, the lowest average price point in the central core, the area experienced a modest increase in home-buying activity in the first six months of the year, compared to year-ago levels. The wide variety of bungalows and two-story homes, often situated on 50 ft. lots, found throughout the neighbourhood represent good value to price-conscious buyers, many of whom welcome the potential to add value to the property down the road through renovation or demolition.
In the city’s west end, increased waterfront development in the form of new condominiums and townhomes and the revitalization of the lakeshore have contributed to increased demand in the Alderwood, Long Branch, New Toronto and Mimico (W06) neighbourhoods. The area, within a stone’s throw of the downtown core, is growing in popularity with step-up buyers and young professionals, many of whom are drawn to its value proposition. The area is one of the few within the 416 with an average detached home price of under $1.4 million. Many of the homes also have basement apartments, an attractive feature to some buyers looking to share carrying costs. Detached home sales rose 9.3 per cent to 165 units in the first six months of 2023, compared to 151 during the same period in 2022.
Langley, in the Fraser Valley, was the sole market to experience an upswing in sales, rising 7.9 per cent year over year. Five hundred and seventy-four detached homes changed hands this year, up from 532 one year earlier, with new listings up 12.3 per cent in June. Affordability was a driving factor, augmented by a surge in sales as rate holds neared expiration in June. The diverse community draws from a wide demographic, attracting mostly millennial buyers who find good value in the community’s newer housing stock. Homes in the area are typically between 10 and 15 years old, situated on smaller lot sizes, with many offering rental suites. For buyers who work from home, the move to Langley can shave thousands off the cost of a detached property, especially when compared to similar product on the other side of the bridge.
Of the 82 markets surveyed in the RE/MAX Hot Pocket Communities Report, six posted an increase in the average/median price of a detached home in the first half of the year. Tight market conditions contributed to the uptick, as well as a greater number of sales at the top end of the market. Lifecycle remained a factor driving sales activity regardless of price point.
The Cabbagetown, Church-Yonge Corridor, South St. James Town (C08) area of the central core offers very few detached properties as evidenced by the low number of sales (six). Buyers are more than willing to step up to the plate to be in the neighbourhood, where average price is up 11.7 per cent to $3,111,667. Days on market hovered at eight at the end of June 2023.
A chronic shortage of listings continues to characterize Toronto’s Rosedale/Moore Park (C09) community. Listing days on market are amongst the lowest in the city at seven at the end of June. Average price, at $4,337,829 has risen 4.3 per cent year over year. Values in the area range dramatically – from $1.75 million to as much as $16 million – as evidenced by recent activity and as such, can be influenced by a handful of sales at the top end of the market. This year, there were 14 sales over the $5 million price point, including one well over $10 million. Forty-two per cent of detached homes in the area moved for more than list price in the first half of the year.
Value continues to be the central theme in high-performance markets as well during the first half of 2023. Average price for detached homes in the Don Mills, Banbury, Parkwoods-Donalda (C13) has risen 3.7 per cent to $2,448,592 over year-ago levels for the same period. Just over 100 homes sold in the area between January and June, falling just seven sales short of last year’s levels. The area, offering large lots and good-sized homes is considered a bargain when compared to neighbouring C12 (York Mills, Bridle Path, St. Andrew’s), where the average price point is much higher ($4,373,724).
West Vancouver-Howe Sound also saw an uptick in the median price, rising 1.9 per cent in the first half of 2023. Strong demand and limited availability of detached properties in prestigious West Vancouver-Howe Sound placed upward pressure on values in the first six months of the year. Median values rose to $3,175,000, up from $3,115,000 as more product moved at the top end of the market, including three homes priced at over $10 million. The area, a perennial favourite with mature buyers looking for expansive water views, saw close to 200 homes change hands this year, down from 284 one year ago.
Buyers looking for a foothold in the Vancouver market are driving demand for detached homes in the Gulf Islands. Just a ferry away, the island lifestyle has growing appeal with work-from-home buyers, in large part due to its affordable price point. Median price year to date sits at $902,000, up 13 per cent from the $798,000 reported between January and June in 2022.New listings are exceptionally scarce, with just 12 properties on the market at the end of June, down 42.9 per cent from one year earlier.
“We’re at a crossroad and the biggest question remains, where do we go from here?” says Ash. Hints could exist in what’s transpired in years past. Eerily similar circumstances existed in 1994 when the Bank of Canada raised rates from 7.25 to 10.5 per cent in under a year (between February 1994 and January 1994). The impact on GTA’s housing market was immediate, with sales softening and average price declining from close to $209,000 to $198,000 in 1996. The same factors are at play today, with the markets only saving grace the lack of inventory currently listed for sale.
“With inflation coming in hotter than expected in July, the Bank of Canada is forecast to raise rates yet again in September,” says Ash. “If that holds true, homebuying activity will likely remain subdued for the foreseeable future. However, we believe that once stability returns to housing markets across the country, momentum should build again as buyers take advantage of improved affordability levels. We expect the tide will turn. It’s only the timing that is still to be determined.”
*Leger is the largest Canadian-owned full-service market research firm. An online survey of 1,517 Canadians was completed between July 21-23, 2023, using Leger’s online panel. Leger’s online panel has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.5 per cent, 19 times out of 20.
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