Is there renewed optimism in the Canadian real estate market?
It has been more than a year since the Bank of Canada (BoC) raised interest rates, and now the policy rate is the highest since before the global financial crisis. Has Canada’s housing market baked rates into the cake? Are homebuyers taking advantage of the modest correction in residential property prices? Is the real estate sector bracing for the typically busy homebuying spring season?
The latest March 2023 numbers potentially offered a sneak preview of what to expect over the next few months.
According to the Canadian Real Estate Association (CREA), home sales rose 1.4 percent month-over-month in March but remained down more than 34 percent year-over-year. The MLS® Home Price Index (HPI) edged up 0.2% month-over-month but was down 15.5% year-over-year. The national average home price was down nearly 14 percent from the same time a year ago, sliding to $686,371. When the Toronto real estate market and the Vancouver housing industry are removed from the equation, national home prices are about $530,000.
So, with this in mind, what are some of the key trends in today’s Canadian real estate market?
- Economic Concerns
Unsurprisingly, concerns over the cost of living are playing a crucial role in the home buying and even selling process in 2023.
A new study commissioned by RE/MAX found that 59 percent of Canadians have at least one financial worry as they navigate the housing market: rampant price inflation (34 percent), the lack of affordable housing in their neighbourhood (25 percent), and the rising cost of rent impacting their ability to save for and purchase a home (25 percent).
But even the broader economy is weighing on homebuying decisions, particularly among first-time homebuyers. The study revealed that 42 percent of first-time homebuyers are sitting on the sidelines of the Canadian real estate market due to the consternation surrounding the economy.
Overall, evolving conditions in the economic landscape have altered the buying decisions of 72 percent of Canadians.
- Barriers to Homeownership
Before the coronavirus pandemic, real estate prices in the major urban centres, particularly Toronto and Vancouver, were obstacles for households trying to accomplish the dream of homeownership. A common strategy was to relocate to a rural or suburban community. But with prices higher than they were before the COVID-19 public health crisis, this might no longer be feasible.
Put simply; there are too many barriers to homeownership.
The report commissioned by RE/MAX highlighted a series of barriers to entry to the country’s housing sector:
- Economic Uncertainty (46 percent)
- High Interest Rates (44 percent)
- Not Enough Savings (36 percent)
- Dislike the Neighbourhood (34 percent)
- Language and Terminology (31 percent)
- Real Estate Agents
Real estate agents have always been critical to the homebuying and selling journey. Without them, you might set yourself up for too many headaches, and Canadians realize this. In fact, for the latest crop of homebuyers, 69 percent acknowledged that their real estate agent made them feel less stressed throughout the process.
Despite conceding the pressing need for real estate agents, buyers and sellers still have set criteria for realtors. Specifically, nearly half (49 percent) of Canadians list a real estate agent’s ethical credentials to be of the utmost importance, which is especially true for millennials (65 percent) and Generation Z (56 percent).
In the end, it is all about honesty, says Alisha, a repeat homebuyer in Alberta.
“[Our real estate agent] was very honest with us when we were doing our inspection,” she said in the report. “She went through it. She’s a mother of older kids now and went through it as if she was our mom, and she was like, ‘Make sure you ask them about this and do this.’ I felt she really cared.”
- Space for Work and Play
In the early days of the public health crisis, families learned that they needed more space since they would be confined to their homes for work, school, and a broad array of other activities, like entertainment and exercise.
Therefore, the post-pandemic modern life requires more space at home, meaning that they need to better utilize floors, rooms, and walls in the kitchen, living room, bedroom, and everywhere else.
“People learned during COVID that they can perform a lot of their working functions at home, which has implications for what the home is. The home is also a workplace, and the design of the home needs to accommodate that,” said Ken Greenberg, the former director of urban design and architecture of the city of Toronto, in the report.
At the same time, Canadians desire a healthier work-life balance. Forty-seven percent of remote Canadian workers are struggling to achieve this desire, and a third of Canadians report feeling burnout.
Ultimately, it is about the home allowing families to “shift their mindset,” says Chelsea Hamre, a RE/MAX real estate agent.
“People are bringing more intentionality and purpose to how they are utilizing space. The office needs to feel different from the kitchen or the bedroom. They’re looking for spaces that can shift their mindset,” she stated.
- The Community
In recent years, it has often felt like the idea of community has been abandoned. Some assert that this is more pronounced in the big cities. However, experts argue that the pandemic diminished this feeling since more households gathered in parks instead of in front of their television sets.
As a result, more households have become accustomed to frequenting public areas, whether streets or outdoor cafes. In fact, more than half (56 percent) of Canadians consider community spaces as something they consider when purchasing a home and the same percentage report that a vibrant local community is something they consider when buying a home.
Of course, safety is paramount, too. Seventy-three percent of Canadians list neighbourhood safety as a top priority when deciding where to buy.
- Homebuying Sentiments
Is the Canadian real estate market still moderating? Many markets across the country are shifting into balanced territory, and this, according to a survey, is the greatest cause for optimism (34 percent).
But there are several other wishes that homebuyers need:
- New ‘missing middle’ housing
- Eco-friendly housing options
- Liveability in rural areas
- Car-free infrastructure
- Updated road infrastructure