RE/MAX Canada reports that move-up buyers, Canadians who own homes and upgrade, are driving gains in the spring 2023 housing market, aiming to beat Bank of Canada interest rate hikes. This trend is observed in nine of Canada's largest housing markets.
Move-up buyers drove strong demand for residential properties across Canada in the second quarter of the year, thanks to the Bank of Canada's temporary pause in overnight rate hikes. This led to double-digit price increases in five of the nine markets analyzed between January and June 2023, including Regina, Greater Toronto, Hamilton, Winnipeg, and Montreal. In the remaining four markets, single-digit price upswings were noted as sellers held on to properties that fell short of peak price levels reported one year ago. Fear of further rate hikes continues to impact the market, with many move-up buyers hoping to enter before rates climb again. RE/MAX brokers noted increased urgency in the market as buyers sought mortgage pre-approvals with guaranteed rate holds in place for a 120-day period before the BoC's June and July announcements.
Equity gains have significantly impacted Canadians' decision to move up to larger homes or better neighborhoods, particularly in central and eastern Canada. Trade-up activity typically occurs within four to seven years of the initial home purchase. RE/MAX found that almost every market reported a significant upswing in value over the five-year period, ranging from just over 3% in Regina to over 80% in Halifax. The primary factor driving demand through the first half of 2023 was necessity, with quality-of-life considerations being central to purchasing decisions. This was true regardless of the move being made, whether downsizing or simplifying in walkable neighborhoods, trading up or making lateral moves, urban or suburban.
The BoC's key rate has increased to 5%, causing homebuying activity to slow in most major Canadian housing markets during the summer months. However, once the BoC ends quantitative tightening and rates unwind, demand for housing is expected to rise again. The focus should now be on supply, resulting in renewed upward pressure on pricing. The housing shortage will have severe repercussions on Canadian real estate and affordability. In the short term, BoC movements may reduce demand at lower price points, but they may also cause pent-up demand to build and new home construction to contract. When the BoC relaxes quantitative measures, housing supply will fall even shorter due to record population growth.
source: re/max
