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, according to a report from ReMax Canada.

The ReMax Canada Move-up Market Report examines nine of Canada’s biggest housing markets and found that buyers took advantage of the Bank of Canada’s (BoC) 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. Tight inventory levels placed upward pressure on values, prompting double-digit price increases in some markets, including the GTA and Hamilton.

“January pretty much marked the trough for residential activity in markets across the country, as sales and prices reached new lows,” says Christopher Alexander, president of ReMax Canada.

Market psyche

“When the BoC 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 BoC 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.”

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.

Equity gains also factored into Canadians’ decision to move up to larger homes or more preferable neighbourhoods, despite the pandemic-induced rise and fall of real estate value, ReMax says.

“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,” says Alexander.

Renewed upward pressure on pricing

Necessity was the primary factor driving demand throughout 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.

With July’s 0.25 basis point rate hike, the BoC’s key rate now sits at five per cent, and homebuyer activity is expected to slow through the summer months in most major Canadian housing markets. However, once it’s clear that the Bank of Canada 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.