Pricing and supply issues are continuing to push buyers out of Canada’s two most expensive housing markets, and into surrounding areas.
The 2017 ReMax Spring Market Trends Report says significant price increases and high demand in the Greater Toronto Area, in particular, during the first quarter of 2017 spurred growing numbers of buyers to leave the downtown core, in search of greater affordability in markets across southern Ontario. This activity is driving price appreciation in Mississauga, Brampton, Durham, Barrie, Hamilton-Burlington, Windsor, and even Kingston. The GTA saw the average residential sale price rise by 29 per cent, to $873,631 during the first quarter of 2017, from $675,492 in the same period of 2016.
In Greater Vancouver, demand slowed in the first quarter and average sale price decreased 11 per cent year-over-year, to $969,900 from $1.09 million in the first quarter of 2016. The decline in average sale price is in part due to the introduction of the foreign buyer tax last August, a relatively severe winter and the stabilization of prices after peaking in May 2016, ReMax says. Buyers from Vancouver and those migrating from other provinces are fueling activity in Fraser Valley, Kelowna and Victoria, particularly in the upper-end of the market due to relative affordability in these regions.
“The move-over buyer activity we’re seeing in the areas surrounding Canada’s two largest urban centres is a direct response to price appreciation caused by high demand in recent years,” says Elton Ash, regional executive vice-president, ReMax of Western Canada. “Price and location are the most important factors to buyers. If the price isn’t right, move-over buyers look to markets where they can find a better balance of affordability and square footage, and still have access to greenspaces, transit options and retail centres.”
The old adage of location, location, location is proving even more important. A recent ReMax survey conducted by market research firm Leger found that when making buying decisions, more than two-thirds of Canadians consider location to be more important than the style or size of the home.
Other factors influencing home purchases
- Access to green space (77 per cent)
- Proximity to work (66 per cent)
- Proximity to retail centres (65 per cent)
- Proximity to family and friends (65 per cent)
All of these ranked higher than the style of a home.
How the GTA market reacts to the Fair Housing Plan, introduced by the provincial government on April 20, may take a few months to play out, ReMax says. One measure was a 15-per-cent Non-Resident Speculation Tax (NRST), similar to the foreign buyer-tax introduced in Vancouver last year. This initiative may impact consumer confidence in the short-term, as buyers hold out until they fully understand how they are affected, causing overall market activity to slow.
“Toronto and Vancouver are very different markets, as Vancouver’s population and geography are much smaller,” says Christopher Alexander, regional director, ReMax Integra Ontario-Atlantic Canada Region. “At this point, there is limited data on how many foreign speculators are active in the GTA market, but it is fair to assume that the new tax will impact the middle-class and not just buyers in the upper-end of the market. In the short-term, potential sales may stall as buyers wait to see the impact of the changes, which in turn could create a ripple effect throughout the Golden Horseshoe. However, it will be interesting to see how this new legislation will affect the demand for housing in the market.”
In Western Canada, particularly in Alberta, slowly recovering oil prices, low interest rates, and U.S. approval of the Keystone XL pipeline project have renewed buyer optimism, particularly among move-up buyers and Millennial, first-time buyers who are typically looking to buy condominiums. The average residential sale price increased three per cent year-over-year in Calgary to $482,065, up from $467,780 in the first quarter in 2016.
In Edmonton, a wide variety of inventory across the market provides good opportunities for buyers, resulting in a 12-per-cent increase in activity and stable year-over-year prices to start 2017.
Charlottetown and Halifax experienced increased demand from foreign buyers in the first quarter, in addition to sustained demand from buyers moving back to Atlantic Canada from other parts of the country to purchase more affordable housing.