Move-Up Buyers Drove Demand for Canadian Real Estate in Q2

Move-Up Buyers Drove Demand for Canadian Real Estate in Q2


Existing homeowners are driving housing market gains ahead of interest rate hikes, as home ownership continues to be a top priority for Canadians from coast to coast


What began as a trickle of movement into housing markets late in the first quarter turned into a swell, as move-up buyers drove strong demand for residential properties across the country throughout the second quarter of the year. Buyers took advantage of the Bank of Canada’s temporary pause in overnight rate hikes in the second quarter of the year, sparking a flurry of activity in the mid-to upper-price ranges in Canada’s biggest housing markets. Tight inventory levels placed upward pressure on values, prompting double-digit price increases in five of the nine markets analyzed, between January and June of 2023. These include Regina, Greater Toronto, Hamilton, Winnipeg and Montreal. Meanwhile, single-digit price upswings were noted in the four remaining markets – Greater Vancouver, Calgary, Ottawa and Halifax – 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 psyche, with many move-up buyers hoping to get into the market before rates climb again. RE/MAX brokers noted increased urgency in the market as buyers sought to obtain mortgage pre-approvals with guaranteed rate holds in place for a 120-day period, prior to both the BoC’s June and July announcements.

“January marked the trough for residential activity, as sales and prices reached new lows. When the Bank of Canada signalled its intent to hold on further interest rate hikes, the floodgates opened, sending buyers into the market from coast to coast. Inventory challenges re-emerged in most major centres as demand once again outpaced supply. Quality listings were quickly snapped up, many moving in multiple-offer situations, which served to draw more sellers into the market in April. By May, the market was moving full speed ahead until the Bank announced its decision to raise the overnight rate in June and again in July, taking the wind out of the proverbial sails of most markets, with some exceptions, namely Calgary, Regina and Montreal.” Christopher Alexander President, RE/MAX Canada.

Equity gains also factored into Canadians’ decision to move up to larger homes or better neighbourhoods, despite the pandemic-induced rise and fall of real estate value. This was especially true in central and eastern Canada. With trade-up activity traditionally occurring within four to seven years of the initial home purchase, RE/MAX examined pricing in June 2018 compared to June 2023 and found that almost every market reported a significant upswing in value over the five-year period, ranging from just over three percent in Regina to more than 80 percent in Halifax. “While the threat of further interest rate hikes has given some pause to the market, particularly at entry-level price points, robust equity gains over the past five-year period provided the means and confidence to fuel solid buyer intentions in move-up markets across the country,” explains Alexander.

Necessity was the primary factor driving demand through the first half of 2023. Whether it was a growing family, the need for more space to accommodate new work-from-home arrangements and schedules, or a better school district, quality-of-life considerations were central to purchasing decisions. This proved true regardless of the move being made – whether downsizing or simplifying in more walkable neighbourhoods closer to the core, trading up or making lateral moves, urban or suburban.

“Inevitably, periods of contraction and short-term restraint ultimately give rise to increased pent-up demand. You can only hold back the impetus for so long. Real estate, after all, is driven largely by lifecycle events and broader factors such as population growth. While some will adjust their timing, most purchasers will eventually move forward, and we’ve seen that pattern emerge time and time again as move-up buyers nationwide re-ignite demand and competition for a limited number of listings.” Elton Ash, Executive Vice President, RE/MAX Canada

With July’s 0.25 basis point rate hike, the BoC’s key rate now sits at five percent, and homebuying activity is expected to slow through the summer months in most major Canadian housing markets. However, once it’s clear that the BoC is nearing the end of quantitative tightening and rates start to unwind, demand for housing will likely ramp up yet again. With uncertainty around financing out of the equation, the focus should remain squarely on supply again. In the move-up market and across the board, that will translate to renewed upward pressure on pricing. “One simply cannot understate the serious repercussions the housing shortage will continue to have on Canadian real estate and affordability,” explains Alexander. “In the short term, while the BoC’s movements may clamp down on housing demand, especially at lower price points, we expect they will have unintended consequences, serving as a temporary dam causing pent-up demand to build and new home construction to contract. When the BoC decides to finally relax quantitative measures and the dam bursts, housing supply will fall even shorter amid record population growth.”


While sales in the Calgary housing market remain more than 20 percent off last year’s torrid pace, activity has been exceptionally robust in the first half of the year in Calgary. Inventory shortages across all housing types and price ranges have created a competitive marketplace, with one in every three homes now sold in a multiple-offer situation. Lack of supply has impacted sales figures, with inventory down almost 30 percent compared to last year. According to the Calgary Real Estate Board, more than 14,300 homes have sold year-to-date, down from 18,687 during the same period in 2022. Year-to-date average price now hovers at $539,668, close to two percent ahead of the $529,826 reported one year ago, making Calgary one of the only markets in the country where the average price now exceeds 2022 levels.

Strong economic fundamentals and affordability are behind the push for the Calgary housing market. Values are amongst the lowest in major Canadian centres. During the pandemic, the province saw a significant upswing in in-migration as affordable housing and job opportunities attracted buyers from other provinces, including British Columbia and Ontario. That trend has continued in 2023 as buyers from other provinces seek to realize homeownership.

Move-up buyers have been active in the Calgary housing market, with the greatest demand occurring between $500,000 and $700,000. Listings remain scarce as existing homeowners are reluctant to sell for fear of not being able to find a new home and/or get back into the market. Buyers have subsequently expanded their search perimeters to ensure that any two-storey home with a double-attached garage is considered, whether it’s in the north or south, east or west end of the city. Frustration is building with every lost bid.

The latest of the Bank of Canada rate hikes, intended to quell activity, only served to drive more buyers into the market, many are concerned that housing values will rise beyond their reach. Supply constraints are expected to be the greatest challenge facing buyers heading into the second half of the year when available listings typically decline. At the current rate, unit sales in Calgary are forecast to match or exceed year-ago levels, while average price pulls ahead.

Courtesy RE/MAX Canada.

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