According to a recent report from Re/Max Canada, the surge in housing activity in the first half of the year was driven by buyers looking to upsize their homes, taking advantage of a period of stability in interest rates. This surge came after a housing correction that hit its “trough” in January when the Bank of Canada paused its interest rate hike cycle. However, the limited number of properties on the market meant that buyers were competing for a small number of listings, leading to an increase in prices in many markets.
Re/Max identified established homeowners as the primary buyers fueling the spring market. Despite the decline in home values over the past year, homeowners in all nine large markets tracked by Re/Max saw significant increases in equity over the past five years. This allowed sellers in 2023 to upsize their homes, especially among those who had held off making a move during the housing correction. Growing families and the need to adjust to new work-life arrangements were the main drivers of demand in the spring.
Although most markets have shown signs of slowing down, Re/Max listed Regina, Calgary, and Montreal as exceptions. Re/Max President Christopher Alexander noted that the past two interest rate hikes may have caused some hesitation in the market, particularly at entry-level price points. Going forward, Alexander expects it to become increasingly difficult for first-time homebuyers. He suggests that prospective buyers consider more affordable condos or look at homes outside of the expensive British Columbia or Ontario markets. He also advises considering income properties with rental units to offset high monthly payments.
The ability to upsize depends on various factors, including growth in income, the difference in home values between entry-level homes and higher-tier properties, interest rate levels, and the amount of debt and equity a homeowner has. Alexander emphasized that timing the market and balancing the needs of a growing family can be challenging.
A recent analysis by real estate outlet Point2 found that, on average, non-condo properties were 40% more expensive than condos in the 48 most populous cities in Canada. To afford to upsize, condo owners would need to save up approximately two years’ worth of income or around $214,000. Some cities, particularly in Ontario and British Columbia, had a larger price gap between condos and non-condo properties. On the other hand, cities like Halifax, Trois-Rivieres, Quebec, St. John’s, Newfoundland, and Regina had a relatively small price gap and strong local incomes, making upsizing more affordable in those markets.
In conclusion, while the surge in housing activity in the first half of the year was driven by buyers looking to upsize their homes, the limited supply of properties on the market led to an increase in prices. Established homeowners who had seen significant increases in equity over the past five years were the primary buyers fueling the spring market. However, Re/Max expects the market to slow down, with Regina, Calgary, and Montreal being exceptions. First-time homebuyers may face challenges in the future, and Re/Max suggests considering more affordable options or looking outside of expensive markets, as well as considering income properties with rental units. Timing the market and balancing the needs of a growing family can be difficult. Analysis by Point2 shows that the price gap between condos and non-condo properties varies across cities, with some markets being more affordable for upsizing.
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