A new report from Re/Max Canada reveals that the detached housing market in the Greater Toronto Area (GTA), Greater Vancouver and Fraser Valley is being fueled primarily by investors and move-up buyers.
With first-time homebuyers increasingly priced out of these expensive markets, those looking to upgrade or invest in real estate have become the main drivers of sales activity in the first half of 2024.
‘The first (June’s) interest rate cut did little to incentivize buyers, but the second may have struck a nerve’
“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 Canada 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.”
The Re/Max Hot Pocket Communities Report found that nearly 40 per cent of the surveyed markets (33 out of 83) reported an increase in detached home values in the first six months of 2024, while 30 per cent of markets (25 out of 83) saw a rise in the number of sales. This indicates a robust demand for detached homes, even in the face of affordability challenges.
GTA: Sales momentum and price increases
In the GTA, the 416 area code (encompassing Toronto proper) has shown the strongest sales momentum. Just over 34 per cent of neighbourhoods there either remained stable or experienced growth in detached homebuying activity, outpacing the 905 area code as well as Greater Vancouver and Fraser Valley. This resurgence is particularly notable given the region’s challenging real estate landscape, where high prices have kept many first-time buyers on the sidelines.
Specific neighbourhoods in Toronto have seen notable increases in homebuying activity. Areas such as Dufferin Grove, Little Portugal, Trinity-Bellwoods and Rosedale-Moore Park have all reported significant gains in sales.
On the pricing front, the West End of Toronto has led the way with some of the highest increases in detached housing values. For example, neighbourhoods like Kingsway South and High Park North have seen prices rise by over 7.0 per cent to 9.0 per cent compared to last year.
Greater Vancouver and Fraser Valley: Limited inventory drives price appreciation
In British Columbia, limited inventory has been a critical factor supporting price appreciation in the detached home category, particularly in the Fraser Valley, with over 83 per cent of its local markets reporting an increase in average prices. This is followed closely by Greater Vancouver, where over 70 per cent of neighbourhoods have noted rising median values.
Areas such as Squamish, Burnaby and Port Coquitlam have experienced some of the largest price gains, with median home values increasing by as much as 14.2 per cent. Despite the rising prices, demand remains strong, driven by a combination of local buyers and investors looking to capitalize on the region’s long-term growth potential.
Change in investor activity
The report highlights a notable shift in investor behaviour, particularly in the GTA. Disenchanted with the performance of condominiums, many investors are now turning their attention to detached homes, especially on smaller lots in Toronto’s east end.
A recent report by Urbanation and CIBC Economics found that condominium investors who closed on newly completed units in 2023 faced negative cash flow (of nearly $600 per month), which has prompted many to reconsider their investment strategies.
Affordable housing and the first-time buyer dilemma
While the report highlights significant price appreciation in many markets, it also underscores the challenges facing first-time buyers. Affordability remains a significant barrier, particularly in high-demand regions like the GTA and Greater Vancouver. However, there are still pockets of affordability within these markets.
Regions like Durham in the GTA and the Sunshine Coast in Greater Vancouver offer detached homes priced under $1 million, providing opportunities for those looking to enter the housing market.
The report also calls for policy changes to address the affordability crisis. One suggestion is to extend longer amortization periods (up to 30 years) to resale homes, similar to what is currently available for new construction. While it may not be enough, it could help more buyers qualify for mortgages in high-priced markets and provide some relief to the ongoing affordability challenges.
“All boats rise with the tide — once the first-time buyers segment gains greater traction, we should see a ripple effect,” says Alexander. “We’re not there quite yet, but the tide is beginning to turn … The gap is closing amid growing buyer confidence. The only dark cloud on the horizon is the possibility of a U.S. recession given stock market volatility.”
Alexander stresses that being so closely tied to the U.S. economy, Canada is not insulated, and we can expect buyers to “stay tuned to any possible economic headwinds.”
Review the full report, including market overviews, here.
