Fuelled by a drop in prices, there was a “short burst of home-buying activity” in the Greater Toronto Area (GTA) during this year’s second quarter, but it was cut short by interest rate hikes and a lack of supply, according to a new report from RE/MAX Canada.
Properties that changed hands most often were detached homes, which were more affordable this year in almost every part of the GTA compared to 2022, the report says.
“Anxious homebuyers were quick to identify the bottom of the market and jumped in with both feet in the second quarter of the year,” said Christopher Alexander, President of RE/MAX Canada in a press release.
“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.”
In Toronto, the report found that just four neighbourhoods saw an average increase in detached home values in the first six months of the year compared to the same period last year.
The Palmerston, Little Italy, Trinity-Bellwoods, Dufferin Grove area saw a whopping 16.1 per cent increase, from $2.1 million a year ago to $2.46 million.
Prices in Cabbagetown rose nearly 12 per cent, crossing the $3 million mark, and detached home values in Rosedale, Moore Park and in Banbury-Don Mills, Parkwoods-Donalda saw increases of around four per cent each, according to the report.
Despite the surge earlier in the year, RE/MAX found that far fewer detached homes have been bought and sold this year compared to 2022, with 95 per cent of markets surveyed reporting a downturn in home-buying activity.
Just three GTA neighbourhoods saw an increase in detached home sales year-over-year, the most significant being in the Bayview Village, Don Valley Village, Henry Farm area, which saw an increase of more than 21 per cent.
Sales in Alderwood, Long Branch, New Toronto were up more than nine per cent, while Bathurst Manor, Clanton Park saw a slight increase of around 1.5 per cent, according to the report.
“In many areas, a critical shortage of properties continues to hamper home-buying activity,” the release reads.
“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, where listings were down 58.1 per cent, with just 26 properties available for sale.”
The report found that increased trade-up buying activity fuelled by more affordable prices pushed the overall share of detached home sales to 44.7 per cent in the GTA this year, up slightly from one year ago.
“Today’s purchasers are focusing on value-added properties and communities, given new market realities,” said Elton Ash, Executive Vice President of RE/MAX Canada in the release.
“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.”
An example of this trend, according to RE/MAX, is the significant increase in sales of detached houses in York Region; which saw a 104 per cent increase over home-buying activity in the second quarter.
“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,” the release continues.
“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).”
All in all, Ash says that the GTA housing market is at a “crossroad.”
With interest rates at a 21-year high, experts expect home-buying activity to remain low for the time being, and the current lack of inventory is one of the few factors keeping the market afloat.
“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,” Ash added in the release.
“We expect the tide will turn. It’s only the timing that is still to be determined.”
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