Opportunity Still Exists in GTA & Vancouver Real Estate

Despite sky-high prices in Canada’s two largest markets, is there still an opportunity in the GTA and Vancouver real estate? This is indeed the million-dollar question for prospective homebuyers. 

Although there was a tepid decrease in sales activity and home valuations in the Toronto and Vancouver real estate markets, conditions have been revived, even in a rising-rate environment. With limited inventories and robust demand, some first-time homebuyers might find it daunting to purchase residential properties in either housing market. 

According to the Toronto Regional Real Estate Board (TRREB), the MLS® Home Price Index Composite benchmark for August 2023 was close to $1.1 million. The Real Estate Board of Greater Vancouver (REBGV) reported that the MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is above $1.2 million. 

Believe it or not, there is still an opportunity to come across properties that meet your needs. 

Opportunity Still Exists in GTA & Vancouver Real Estate

The second quarter was quite considerable in the second quarter of 2023, driven by the brief respite in rate hikes by the Bank of Canada (BoC) that kept the conventional five-year fixed-rate mortgage rate steady for a couple of months. Overall, the year’s first half saw declines in home valuations, especially compared to the same time a year ago. 

Nationwide, detached property value declines were seen in 43 per cent of housing markets, including 24 in the Greater Toronto Area (GTA) and nine in the Greater Vancouver Area. In the GTA, nominal decreases were found in Richmond Hill, Willowdale East, and Newtonbrook East. In the GVA, nominal drops were located in Vancouver West. 

Meanwhile, households that can move up are noticing an opportunity to make that giant leap in these markets that are witnessing lower overall values. This was seen in the trade-up statistics. 

Trade-up activity increased the share of detached home sales to close to 45 per cent in the GTA and nearly 30 per cent in the GVA. These rates were up slightly from the previous year. 

“Today’s purchasers are focusing on value-added properties and communities, given new market realities,” said Elton Ash, the executive vice president at RE/MAX Canada, in a report. “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.” 

Another factor that flies under the radar is that new construction activity is strong in Toronto and Vancouver. In the 416, housing starts surged 52 per cent to 5,200 units in July, according to the Canada Mortgage and Housing Corporation (CMHC). Additionally, in Vancouver, housing starts advanced 50 per cent to 2,962 units. This could provide some relief in the tight supply area. 

Interest Rates and Housing 

Does the Bank of Canada (BoC) have another rate hike left in its inflation-fighting arsenal? Or is it time to prepare for rate cuts? 

Whether the central bank pulls the trigger on another rate increase this year or not remains to be seen. However, it is evident that the institution is close to leaving rates alone, giving the mortgage market a bit more certainty heading into 2024. Indeed, the organization has signalled that it might be finished with the rate hikes unless there is a dramatic escalation in inflation – recent data highlight a reacceleration in the consumer price index (CPI) and producer price index (PPI). 

That said, any indication that the current cycle has reached its peak could be good news for homebuyers who may be apprehensive about entering the Canadian real estate market. But if the BoC continues to tighten monetary policy and, as a result, make homebuying more expensive, more people may choose to sit on the sidelines, says Jason Mercer, chief market analyst with the Toronto Regional Real Estate Board (TRREB), 

“Because the bank did leave the door open for further hikes, it is certainly possible that some of these people will continue to leave their buying decision on hold until we get a few more readings on inflation and the Bank of Canada’s reaction to these inflation reports at the end of October,” Mercer said in a recent interview with The Globe and Mail. 

In July, the five-year conventional lending rate was 5.99 per cent, up from 5.85 perc ent in June, according to Statistics Canada. 

The home stretch of 2023 should be a compelling time for the Canadian real estate market and the many different pockets like Toronto and Vancouver.