It’s a vicious cycle — house-hunters in expensive markets turn to cheaper ones in outlying regions, and this demand pulls up prices there, too — and it’s playing out in Ontario and British Columbia, suggests a new report.
As home prices in Toronto and Vancouver continue to fly higher, potential buyers are eyeing properties in a number of smaller cities nearby, some of which are now in turn seeing eye-popping price growth themselves, according to the RE/MAX 2016 Spring Market Trends Report.
“Outside of Vancouver and Toronto, surrounding regions continue to experience a spillover effect as buyers move farther out in search of affordable single-family homes,” the report said.
“The population growth in these regions, driven by housing demand, is growing local economies as restaurants, shops, and services expand,” said RE/MAX.
It was Fraser Valley — not the Greater Toronto Area (GTA) or Vancouver — that posted the strongest year-over price growth in the first quarter of 2016, the real estate company found.
The average sale price of a Fraser Valley home soared 31 per cent to $719,992 in Q1, compared to the same period a year ago, while sales surged 66 per cent.
“Fraser Valley’s proximity to metro Vancouver makes the region a popular spot for buyers looking for relatively affordable and spacious properties,” the real estate brokerage said.
“The pending expansion of Highway One is expected to reduce the Valley corridor commute and attract more buyers to the region,” RE/MAX forecasted.
With a 24 per cent price surge during this period to $1,103, 586, Greater Vancouver (the most expansive of 22 markets included in the report) followed, placing ahead of the GTA, where prices reached $675,492, up 14 per cent in a year.
Ontario’s capital had company: Barrie and its surrounding area’s prices appreciated at the same rate, in line with the trend the real estate company identified.
But though Barrie’s average home price shot up 14 per cent year-over-year in Q1 to $401,801 while transactions climbed 27 per cent, it is still a much more affordable alternative to Toronto.
RE/MAX expects low gas prices, which makes commutes cheaper, to help support demand for homes in this market just to the north of the GTA.
It calls for prices to rise 7 per cent here by 2016’s end as the low Canadian dollar helps turns the gears of the city’s manufacturing industry, creating local jobs.
Windsor-Essex, with an average price of $211,211 the second-most affordable market, saw appreciation track at 11 per cent, making it home to the fifth-fastest rising prices from coast to coast.
“Unlike some regions in Southwestern Ontario that are closer to Toronto, first-time buyers in Windsor-Essex still have a robust supply of affordable inventory,” RE/MAX said.
The number of homes changing hands in Windsor-Essex rose 19 per cent in 2016’s first quarter, compared to activity from January to March 2015.
“Alongside renewed consumer confidence and healthy job prospects, low interest rates are making Windsor-Essex a very attractive place for young families to live,” the report explained.
Hamilton-Burlington, Victoria, Winnipeg were the only other markets to register double-digit appreciation, with average prices in all three markets increasing 10 per cent.
In Q1, the average price of a home in Victoria was $543,564 while it reached $300,011 in Winnipeg and $486,008 in Hamilton-Burlington.
“Victoria experienced a very active housing market at the start of 2016, with sales up 48 per cent between January and March,” RE/MAX noted.
Price gains in markets beyond Toronto and Vancouver’s borders are noticeable on a national level, said Elton Ash, vice president of the realty firm’s western Canada branch, in a statement.
“The ripple effect on the housing markets outside of Toronto and Vancouver is quite significant when you look at the Canadian housing market overall,” he stated.
“As a result, when you remove Toronto and Vancouver from the equation, the national average house price still rose approximately 10 per cent last year.”