It is a buyer’s market in most of Ontario and B.C., Globe and Mail reporter Rachelle Younglai says.Paige Taylor White/The Canadian Press
On July 16, reporters Carolyn Ireland, Rachelle Younglai and Salmaan Farooqui answered your questions about real estate during what is usually the market’s busiest season.
Amid economic turmoil and stalling home prices and sales, our real estate experts shared their insights about whether it’s a good time to buy or sell, what to do about interest rate uncertainty and where the markets in some cities could be heading next.
Buying and selling
Is it a buyer’s or a seller’s market at the moment?
Rachelle Younglai: In most of Ontario and B.C., it is a buyer’s market. Buyers are not under the same kind of pressure to make bids without home inspections or bid well over the asking price. That’s because buyers have more choice. Homes are not selling as quickly, especially in the condo space. Many sellers have had to reduce their prices after their properties have sat on the market for months. And many sellers have started to accept that they will not get the same kind of prices that their neighbours got in 2020 to early 2022.
Is now a good time to sell my less-desirable house to move to desirable areas like Burlington and Oakville, where homes are still going over-asking?
Carolyn Ireland: “Over asking” can be extremely deceptive. What was the asking price that fetched that premium? In some areas, agents set an extremely low price in order to attract attention. For example, they may have set an asking price of $999,000 a few years ago and got $1.4-million. Today, they’ll ask $799,000 for a comparable property and get $950,000. In Oakville and Burlington, you may see multiple offers in family-friendly, affordable neighbourhoods because that’s where the biggest pool of buyers is. If you have an attractive property to sell, it could be a very good time to trade up because the more pricey homes are taking longer to sell. These trends are happening in many parts of Southern Ontario, not just Oakville and Burlington.
How does the latest Bank of Canada rate hold impact potential buyers and those renewing their mortgages?
Younglai: For potential homebuyers, it means that variable mortgage rates are not changing, as variable-rate products typically move in tandem with the Bank of Canada’s benchmark interest rate. However, if a prospective buyer wants to get a fixed-rate mortgage, that rate is tied to the bond market and the cost of funding mortgages had been rising in part due to the Middle East war and economic uncertainty.
For those who have to renew their mortgage in the near term and were considering a variable-rate product, it means you are facing similar conditions to last year. Since the interest-rate path is unknown – meaning it could move higher later this year, many mortgage brokers are advising clients to lock in with the fixed rate.
Are investors still dominating the home sales space, or have recent events brought back end users to the market?
Younglai: Investors are no longer dominating the preconstruction condo market and that is the reason why sales of preconstruction condos have dropped significantly in most of the Toronto and Vancouver region. The drop in sales has led to the slowdown in those condo markets and has triggered many developers to cancel projects or try to turn their projects into rental-only apartment buildings.
We are looking to downsize to a smaller house, but there are few on the market and all priced very high. Is our only choice to buy an older house and renovate?
Ireland: Downsizers across the country face this dilemma! The buyer pool for small houses is larger because you’re also competing with first-time buyers and young families. In addition, lots of boomers and empty nesters are searching for a bungalow because they are planning for their later years. In some cities, those small vintage homes are also hard to find because they’ve been torn down and replaced with much larger homes. Buying an older house and renovating may well be a good option if you have the stamina because you’ll likely face less competition in the purchase.
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Market outlooks
Why is Quebec City, where home prices are still increasing, such an exception to the stagnant market?
Salmaan Farooqui: Real estate has historically been extremely cheap in Quebec City. Naturally, that means the market has more room to grow than other cities. It also means that the city attracted more real estate investors, who may have been priced out of purchasing in other more expensive provinces and cities.
One realtor I spoke to said that as prices have increased, it has ushered in a cultural change around renting vs. ownership. Quebec has tended to have a high number of people willing to rent for life. But as people see rent rates and home prices grow so much, they’re more likely to feel the kind of ‘fear of missing out’ and financial pressure that people in cities like Toronto have experienced for decades. Those factors might be pushing more renters to jump into the housing market, which puts upward pressure on prices.
The housing market is still stagnant, yes, but is it for the same reasons as a few years ago?
Ireland: The answer depends very much on the segment. Small condos in the GTA, for example, are still challenging to sell, while single family houses in many cities are humming along. Over all, buyers still believe prices have farther to fall in many parts of the country. Buyers at the high end in Toronto and Vancouver are hesitant. Economic uncertainty, war in the Middle East and the lack of a CUSMA agreement are all weighing on the national market.
Where do you see the Ontario cottage market in the foreseeable future?
Ireland: There’s a hefty amount of supply in Ontario cottage markets this year. Some boomers are deciding it’s a good time to exit the market and younger generations can’t always afford to take over or don’t want to. Also, some folks who paid lofty prices during the frenzy of the pandemic are under financial pressure now that interest rates are higher. Some are forced to sell.
Many buyers, meanwhile, are hesitant to take on a vacation property if they feel any uneasiness about the economy. City houses have come down in value so it’s harder to finance a cottage. Some parts of Ontario cottage country are quite slow in the face of those combined headwinds, and some buyers are waiting for prices to fall farther. That said, people who are financially secure will jump if they feel they are getting a good deal. Sellers need to price realistically.
As far as Montreal is concerned, where do you see the market heading? Will buyers or sellers have an advantage in 2027?
Farooqui: While I don’t have a prediction per se (I wish I had a crystal ball), I’ll share some thoughts. First of all, Montreal has been one of Canada’s strongest markets for many months now. Prices have historically been pretty cheap, and so they have had a lot of room to grow as demand grows, too.
However, in May the city saw sales transactions decline on a year-over-year basis (the median sale price did continue to grow).
It’s also worth noting that other regions that have seen similar levels of growth to Montreal (Regina, Edmonton) have started to see growth come to a halt. These smaller cities are starting to feel the impact of immigration cuts and a slow economy, factors that have been plaguing Toronto and Vancouver for years. It’s possible that Montreal will also be impacted. For the time being, however, it’s still posting pricing gains.
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Market forces
How could Alberta’s upcoming separatism vote impact home prices? We’re saving to buy our first home in Calgary.
Farooqui: I don’t have an educated answer right now, this is actually the next article that I’m going to look into. If we look at another example, uncertainty around separation is certainly a major reason why Quebec’s housing market languished and remained cheap for so many years.
But of course, the separatist movements in Alberta and Quebec are quite different, and separatists still face hurdles before an actual referendum on leaving the country will take place. Look out for my article in the coming weeks!
How do you see immigration cuts affecting housing supply over the next 5-10 years? Could today’s slowdown in construction lead to a future supply shortage if demand picks up again?
Younglai: When it comes to the rental market, cities like Toronto and Vancouver are only starting to see rental vacancy rates return to a level that is somewhat healthy for the rental market. Even some developers have said this to me in the case of Vancouver, and emphasized the need to keep building housing right now.
Developers are certainly struggling to get projects off the ground right now, especially in the condo sector. But one interesting trend we’ve noticed is that condo developers are increasingly trying to shift their projects in purpose-built rental buildings.
Some experts I’ve spoken to hope that this could create more supply in the rental space in coming years.
However, I agree, there is lots of concern right now about whether we’re going to meet the housing development goals that governments have set because of the challenging economic conditions.
Do safety concerns have an impact on local real estate? For example, the recent shooting in the St. Clair West neighbourhood in Toronto.
Ireland: Some agents in cities outside of Toronto do have buyers looking for a less hectic lifestyle. Worries about crime are part of the conversation, but traffic is also a big one. The shooting was horrific, but I don’t believe it’s a reflection on that one neighbourhood, which is very popular with families. Over all, many downsizers from Toronto do seek a smaller town, but others are moving into downtown from the ‘burbs because they want the restaurants, culture and vibrancy that neighbourhoods in the city offer.