Why Canadian Homebuyers Have Serious Bargaining Power Right Now
With an overabundance of active listings accumulating in Canada’s big cities, some homebuyers are finding they can drive a hard bargain.
By Josh Sherman | 2 minute read
![The-taxes-on-selling-a-home-in-Ontario The number of homes on the market continues to climb in major Canadian cities giving some buyers a shot at a discount.](https://wahi.com/wp-content/uploads/2024/07/The-taxes-on-selling-a-home-in-Ontario.jpg)
The number of homes on the market continues to climb in major Canadian cities giving some buyers a shot at a discount.
Canadian home sales remain sluggish on the tail of a spring market that never was — but buyers who are unfazed by current interest rates can reap the benefits of weaker competition in some corners of the market, suggests a new report from RBC Economics.
There are tens of thousands of homes actively listed for sale across Canada’s big cities, including nearly 24,000 in Toronto alone, a 14-year high. With sales activity mostly tepid — national home sales were down 5.9% on a year-over-year basis in May, according to the Canadian Real Estate Association — inventory keeps on piling up.
The upshot? These listings aren’t just providing home hunters more choice. Because so much supply is appearing amid reduced demand, the listings glut is giving the upper hand to some homebuyers, at least in certain segments. “The influx of supply has shifted more of the bargaining power to buyers, who in some markets are still extracting price concessions from sellers,” writes RBC Economist Rachel Battaglia.
While extreme one-off cases — such as this detached home in Oshawa, east of Toronto, that recently sold for $800,000 below asking — steal the headlines, analysis from Wahi of June home sales data suggests there’s a more widespread trend at play.
Last month, 71% of Greater Toronto Area neighbourhoods were in underbidding territory, up from 60% a month earlier, according to Wahi’s June 2024 Market Pulse Report. The leading neighbourhood for underbidding, Mineola, in Mississauga, had a median underbid amount of $250,000.
Condos were more underbid than single-family homes, including detached, semi-detached, and townhouses. Some 90% of GTA neighbourhoods were in underbidding territory for condos, versus 57% for single-family homes.
Condos Are the Sweetest Deals
Buyers shopping around for condos may have the best chances of finding a deal, especially in the Toronto and Vancouver markets, the RBC report suggests.
RBC’s Battaglia notes that the majority of active listings in Toronto as well as Vancouver — where more than 13,000 active listings have accumulated — are for condos. “In fact, almost all the growth in new listings [in Vancouver] over the last 12 months has come from medium and high-density housing,” Battaglia points out. “The number of single-detached homes for sale… is virtually unchanged from a year ago.”
In Toronto, active condo listings spiked 84% annually, compared to detached homes, which were still soaring, albeit to a lesser extent (up 56% on a year-over-year basis).
In both urban areas, prices have been more resilient for lower-density homes than condos. “We expect the influx of multi-unit dwellings is playing a role in the pricing dynamics as more availability relaxes some of the competition for attached and apartment dwellings,” Battaglia adds.
Of course, some markets are more competitive than others.
Price and sales growth remains strong in Calgary, Canada’s hottest housing market.
However, while Calgary homebuyers face tougher competition than their peers in Toronto or Vancouver, they’re still benefiting from the city’s lower price points. “Even though affordability in Calgary has eroded dramatically in recent years, it’s still among the most affordable of the major markets we track — giving buyers an edge compared to other major markets in Ontario and B.C.,” notes Battaglia.
She adds that new listings are outpacing sales in Calgary, too, and that price growth is calming.
“Still, mounting budgetary pressures is likely to keep a lid on market activity in the months ahead, supporting a gradual increase rather than spike in Calgary’s market activity,” Battaglia states.
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There’s Time to Time the Market — but Pent-up Demand is Forecast to Return
Hoping to beat a wave of renewed homebuying competition that’s expected to emerge sooner or later? You still have some time, experts say — but the clock may be ticking.
TD Economics predicts the Canadian housing market is going to “gain traction” during the second half of this year. However, it recently downgraded its forecast for prices and sales for 2024, anticipating that pent-up demand won’t hit until next year alongside more substantial interest-rate relief.
That relief will likely need to come in the form of multiple cuts, suggests a recent Ipsos survey, commissioned by the Toronto Regional Real Estate Board. Interest rates need to fall by at least 100 basis points from recent highs to significantly increase home sales activity, the poll found.
RBC’s Battaglia also says the market won’t really turn the corner until the interest-rate environment changes more materially. “We think most buyers will wait for steeper rate cuts before jumping into the market as the lagged impact of high interest rates keeps budgets under pressure,” writes Battaglia.
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Josh Sherman
Wahi Writer
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