The number of detached homes for sale is declining in key markets in Ontario, Alberta and Nova Scotia. In Toronto, the number of newly listed detached homes totalled 5,184 in September, down 10.8% from last year’s monthly total of 5,811. New detached listings in Calgary are down 12% year-over-year, with 1,381 homes coming to market in September, and across Alberta, sales of detached homes fell by 22% year-over-year in September. Nova Scotia is following suit, with sales in the third quarter of this year down 20.1% year-over-year, for a total of 2,506 sales of detached homes. So what is the driving force behind this decline in detached home transactions? The strength of the rental market is a clear indicator.
Rent prices are higher than ever and prospective home sellers are noticing
Rental prices are at an all time high in many markets. The main factor behind these price hikes has been the rise in interest rates. Not only have buyers taken a backseat while the rates continue to rise, but sellers have also held off due to the lack of interest and competition from prospective buyers. Some would-be sellers are viewing rentals as the better option financially since the cost of borrowing is increasing, and fewer homes are selling as a result.
There were 50,787 sales of all property types across Canada in September 2021, meanwhile, last month there were just 34,452 homes sold, a 32.2% decrease. However, rent prices have jumped 15.4% in September across Canada year-over-year, rising to an average of $2,043 per month. Rent prices are likely to continue climbing, with demand increasing due to the rate hikes and that high demand, coupled with tight rental supply, could cause rents to reach new highs in the coming months.
The Demand for Detached Homes is High, but Affordability is Diminishing
The dream of a detached home is still alive and well for many buyers, but affordability is the main barrier. In a survey of more than 1800 Zoocasa readers, over 60% of respondents said they wanted to buy a home, and 61% of those were interested in buying a detached home. Interest rates have, however, put many buyers’ dreams on hold. The Bank of Canada has raised rates six times this year alone to 3.75% in a bid to tackle inflation. While housing prices have come down since the highs earlier in the year, the cost of borrowing has increased, and mortgages are becoming more expensive to take on or even qualify for. Many buyers have spent months on the sidelines watching the rate hikes unfold and 35% of survey respondents said that the rate increases had a negative impact on their interest in real estate. The interest in buying is still there, but with rates as high as they are, and speculation of another increase before the year is out, rentals continue to look like a more enticing option for some.
Detached Homes and Their Rental Prices
This beautifully renovated Toronto home has not one, but two options for primary rooms, both with ensuites and built ins. There is also a spacious chef’s kitchen with a breakfast bar, perfect for entertaining.
Tucked away in a quiet neighbourhood in the heart of Toronto, this home has an open floor plan and gourmet kitchen, opening onto a beautifully landscaped garden.
This spacious bungalow has a large living and dining room, an updated kitchen, as well as three bedrooms. The third bedroom has access to a large deck and beautiful backyard.
This fully updated, open concept is located in a quiet neighbourhood. It has a private backyard and even comes fully furnished.
Detached home prices have been coming down in many markets and you may be surprised to learn what you can afford. We’re here to help! Give us a call to talk to a real estate agent in your city to begin planning for your dream detached home, and download our free buyers guide to get you started.
