Many neighbourhoods in the Greater Toronto and Vancouver areas saw a jump in detached home sales in the second quarter of 2022 as buyers locked in lower rates and took advantage of discounts, according to a new report from Re/Max.
The real estate brokerage compared home prices and sales activity across dozens of communities in the two metropolises between the first and second quarters of the year.
The report provides a glimpse into how segments of the Toronto and Vancouver housing markets reacted as the Bank of Canada rapidly hiked interest rates, starting in March of this year.
“Those fast and furious incremental increases placed downward pressure on housing sales and prices, improving affordability on one hand, but eroding it on the other,” said Chris Alexander, president of Re/Max Canada, in a statement.
Re/Max found that home values dropped 10 to 15 per cent in the second quarter of the year compared with the first in parts of the Greater Toronto area, with Durham, Peel, Dufferin, York and Halton all experiencing double-digit drops.
Only 15 Toronto neighbourhoods saw an uptick in price quarter-to-quarter, five of which were in the city’s core.
Alexander pointed to the core’s strong demand and finite supply, along with higher average incomes for residents, as keeping the area “resilient” through the downturn.
In Vancouver, 75 per cent of neighbourhoods saw home price declines in Q2, most of which dropped around 10 per cent in value, Re/Max said.
Core regions of Vancouver West and West Vancouver/Howe Sound saw home prices rise quarter-to-quarter, however, up 2.4 per cent and 8.2 per cent, respectively.
Re/Max also flagged a reversal of a pandemic trend affecting suburban markets: while many buyers sought to escape the city at the outset of the lockdowns in spring 2020, they’re now looking to return to the core as some remote work plans come to an end and downtowns reopen.
The softening of prices in these areas, meanwhile, gave prospective buyers an affordable way into a detached home in the suburbs as many were able to lock in five-year fixed mortgage rates as the central bank was mid-way through raising the cost of borrowing.
Some 40 per cent of Greater Toronto Area markets saw an uptick in sales of detached homes in the second quarter compared with the first, Re/Max said. Durham Region reported an uptick in sales in this segment in half of its neighbourhoods.
The Greater Vancouver Area saw detached sales rise in 31 per cent of its markets, quarter-to-quarter.
“For those buyers that were active in Q2, improved housing affordability due to easing prices and the threat of higher rates down the road clearly provided the impetus for many to leap into detached home ownership,” Alexander said.
This trend is giving some existing homeowners the chance to upsize their homes or move into a more desirable neighbourhood, the report stated.
Condo owners, for example, who have seen their property values hold relatively steady, have been able to upgrade to larger, detached homes in these conditions as prices ease in the segment, according to Re/Max.
Detached, luxury buyers unswayed by rising rates: Realtors
At first glance, Toronto real estate agent Pritesh Parekh with Century 21 says the Re/Max report reflects what he’s been seeing in the city. While most headlines have focused on average sale prices in the GTA as a whole, Parekh tells Global News that certain neighbourhoods are indeed proving resilient in the face of rising interest rates.
He says that Re/Max’s claim that “sought-after” areas of the city are staying “hot” is a bit of an overstatement, as there’s no question Toronto real estate has cooled from the peaks of the pandemic housing market seen in February.
“I think using the word ‘hot’ is a little bit crazy when we all know what a hot market was literally a few months ago. To compare it to that is a little bit steep,” he says.
He also cautions that drilling down to the neighbourhood-level can skew price trends, especially in the detached market, where a single home selling for a blockbuster figure could dramatically shift average values.
Rather than focus on “hot pockets” of the city, Parekh points to certain buyer types retaining their buying power through the rising rate cycle.
Those who are buying multimillion-dollar detached homes in Toronto are typically higher income households, he notes, and likely wouldn’t struggle to cobble together a down payment.
In Vancouver, the upper end of the housing market is also proving immune to interest rate shocks so far, according to Layla Yang, a real estate agent specializing in the west coast luxury market.
Yang tells Global News that she didn’t see a slowdown in sales in the luxury market through the first half of the year. She points to the strong buying power in that segment for keeping homes well within reach even as borrowing rates rise.
“The interest rate, it didn’t really affect my own market at all,” she says.
Demand in Vancouver remains high not only from local buyers, but from recently landed newcomers from overseas destinations such as Hong Kong and mainland China, Yang says.
This sustained demand, coming as Re/Max notes inventories are 12 per cent below the 10-year average in Greater Vancouver, will keep price pressure high even as other markets in Canada see declines.
“The price won’t be like a big, big drop. It’s not going to happen for Vancouver,” says Yang.
Back in Toronto, Parekh says he has two clients right now planning to post listings for their townhouses soon in hopes of getting into the detached market.
One client who’s been looking to get a detached home in Toronto with a budget of around $2 million is ecstatic to see home prices drop in their target neighbourhood.
Parekh says that these buyers are looking at higher interest rates as short-term pain that could be refinanced at a later date, but, given historic trends, they’re less likely to ever see home prices this low again.
“I am seeing those who were in the market for detached homes, they’re taking this drop kind of seriously,” Parekh says.
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