RE/MAX Canada president shares some local intel that investors need to know
Canada’s housing market isn’t having the best time generally as higher-for-longer interest rates and inflation keeps many buyers on the sidelines, but investors are buying opportunity.
A new report published today (August 15) by RE/MAX Canada reveals several ‘hot pockets’ in the residential real estate market that have been driven by experienced buyers and investors over the first six months of 2024.
Specifically focused on the detached housing markets in the Greater Toronto Area, Greater Vancouver Area, and the Fraser Valley, these homebuyers have fuelled price gains in almost 40% of the 83 local markets analyzed, and sales activity in 30% of markets.
The GTA’s 416 area code was the hottest pocket identified in terms of sales upswing (34% neighbourhoods saw growth or stability), ahead of the 905, Greater Vancouver and Fraser Valley.
However, for price gains, it was the tight supply in the GVA and Fraser Valley that has supported price gains in the detached homes sector. Fraser Valley saw 83% of local areas noting an upswing in average price, and almost 71% of neighbourhoods in Greater Vancouver marked an increase in median values.
“While affordability remains the top obstacle for first-time homebuyers, more experienced buyers and investors are taking advantage of softer housing values, making their moves ahead of the Bank of Canada’s (BoC) end to quantitative tightening,” says RE/MAX President Christopher Alexander. “Pent-up demand continues to build, with an estimated 20,000 to 25,000 buyers currently lying in wait in the GTA, and another 5,000 buyers in the Greater Vancouver area ready to pull the trigger. The first interest rate cut in June did little to incentivize buyers, but early indications show the second may have struck a nerve.”
For some investors, there has been a shift in focus towards detached homes. This is seen in the GTA where disenchanted condominium investors have shifted their attention to detached housing on small lots in the region’s east end, following research from industry analysts Urbanation and CIBC’s Benjamin Tal which said GTA condo investors were losing money at a 'recessionary' level.
Local knowledge is key
The report highlights the localness of real estate with the gains seen in individual neighbourhoods not necessarily replicated across a wider area. Investors who leverage strong local knowledge gain an advantage.
In the GTA, Alexander explains the kind of properties that are in demand.
“Vibrant downtown/midtown communities remain a perennial favourite with purchasers in Toronto, with buyers vying for detached properties in coveted blue-chip neighbourhoods such as Rosedale-Moore Park, Forest Hill South, the Kingsway, Leaside, and The Beaches, as well as gentrified areas including Trinity-Bellwoods, PalmerstonLittle Italy, and Corso Italia-Davenport,” he said. “The ongoing evolution of these neighbourhoods continues to prop up demand as buyers at all price points are drawn to their attractive walkability scores, entertainment and amenities, including parks, restaurants, trendy shops and cafes.”
Meanwhile, in the Greater Vancouver Area, demand is being driven by Canadians’ desire to be close to nature.
“Recreational communities are represented in the top markets in the GVA, with many buyers seeking to combine the joy of nature with access to the city. Areas such as the Sunshine Coast and Squamish in particular are experiencing a strong uptick in recent years that is also lifestyle driven,” explained Alexander, adding that Bowen Island has increased in popularity, but is only accessible by ferry, making it a true recreational destination.
Moving on up
While investors are a key component of the activity identified in the RE/MAX Hot Pocket Communities Report, those homeowners who want to move up to something bigger than their entry-level home are also active.
“Many purchasers in today’s market are first-time trade-up buyers, moving from semi-detached homes, townhomes, or link dwellings to detached housing,” noted Alexander. “This cohort has been fortunate in the sense that the entry-level price range has been relatively sheltered from downward pressure and has made the step up to a single detached ownership less onerous than in past years. While affordability remains top of mind, first-time trade-up buyers were active in various pockets and price points.”
Overall, what does Alexander see in the coming months for the Canadian housing market?
“On the whole, while home-buying activity is down, a slow recovery is underway,” he said. “Sidelined buyers are expected to make their way back into housing markets, albeit cautiously for now. Improving fundamentals in the months ahead should stimulate greater momentum into the fall and through the beginning of 2025. While improving interest rates will help, it’s undeniable that some first-time buyers are up against considerable challenges likely to temper momentum at the entry level.”
