Renovation and infill Improvements to
single-family housing stock during the pandemic accelerated
housing values and the trend continues to transform cities
TORONTO, Sept. 24,
2024 /CNW/ -- Billions spent in infill and renovation
over the pandemic years raised the overall value of residential
housing stock and continues to support higher pricing on
single-family homes despite downward market pressure in the
country's most expensive markets — Toronto and Vancouver, according to RE/MAX Canada.
The 2024 RE/MAX Canada Changing Landscapes
Report examined the evolution of housing stock and trends
impacting values in Canada's two
largest real estate markets in recent years. RE/MAX found on-going
renewal and revitalization efforts have had a substantial impact on
housing supply and affordability, particularly in urban core areas.
In fact, between 2019 and 2023, the national increase in renovation
spending, including additions, alterations, upgrades and equipment,
approached an estimated $300 billion,
an eight-per-cent increase over the previous five-year period, with
improvements in Toronto and
Vancouver leading the way,
according to Total Residential Renovation Expenditures data
compiled by IBISWorld-Canada and based on Statistics Canada
data.
During the same period, however, the value of residential
building permits issued for single-family dwellings in the
Toronto and Vancouver Census
Metropolitan Areas (CMAs) between January 1,
2019 and December 31, 2023 sat
at just over $27 billion, according
to Statistics Canada. This is down almost 24 per cent from the
previous five-year period, when more than $33.7 billion worth of residential building
permits were issued in the single-family category. This trajectory
is expected to continue in the coming years. In contrast, the value
of residential building permits in the multi-family housing
category climbed 60 per cent over the 2014-2018 period.
"With all available tracts of land in the city committed to
high-density construction, the single-detached home is quickly
becoming a unicorn," says RE/MAX Canada President Christopher Alexander. "Existing homeowners who
can't find what they want in the market, will buy an older home in
an area of their choice and renovate or build their vision. We
expect this trend will strengthen in the years to come and serve to
drive price growth in single-detached housing even further. There
are a variety of variables at play, but renovation and
revitalization is having significant implications for housing
supply and affordability."
Revitalization remains one of the most underestimated factors
behind escalating housing values. The landscape is changing as a
staggering amount of money is funneled into renovation while infill
is redefining neighbourhoods, particularly in areas where the value
of existing structures has not kept pace with increasing land
values. Case in point are wartime bungalows and smaller two-storey
homes that continue to be primary targets, making way for custom
builds that transform working-class neighbourhoods into
up-and-coming hot pockets.
In addition to prompting the physical change of neighbourhoods
and housing, gentrification of neighbourhoods alters the landscape
and the demographic/economic composition of urban centres. A study
of this activity in Canadian CMAs found that in Vancouver,
single-detached houses are getting bigger and condominium
apartments are getting smaller. The densification trend has
resulted in a decrease of single-detached homes. Despite the
decline, newer single-detached houses have been getting larger in
the Vancouver CMA, where homes boasted approximately 3,600 sq. ft.
of living space—the highest of all CMAs examined, reflecting the
impact of new construction/infill.
Meanwhile, the Toronto CMA saw the greatest decline in vacant
land properties from 2019 to 2021 (-6,680). This is significant
since vacant land is closely tied to residential building
construction. (Source: Gentrification, Urban Interventions and
Equity (GENUINE): A map-base gentrification tool for Canadian
Metropolitan Areas: C.I Firth, B. Thierry, D. Fuller, M. Winters
and Y. Kestens; May 19, 2021)
Given close to 30 per cent of the GTA's existing housing stock
and an estimated 20 per cent of Vancouver's was constructed in 1960 or before,
according to data from Statistics Canada, the renovation and infill
trend is not surprising. The cost to rehabilitate older, outdated
homes with unpredictable issues can quickly consume and exceed
budgets. The push to make the best use of scarce land has
homeowners and builders striving to maximize square footage or
increase density on individual building lots in traditional urban
neighbourhoods.
New builds are ongoing in residential neighbourhoods throughout
Toronto and Vancouver, despite the cost of construction in
today's high-interest rate environment. Entire neighbourhoods,
especially in midtown Toronto,
have been entirely transformed, while the evolution of Parkdale, Trinity-Bellwoods, College Steet
West, East York, Riverdale, Leslieville and St. Clair West is just
beginning. The average price of a detached home has climbed by
almost 35 per cent in the Greater Toronto
Area between December 2019 and
December 2023, rising from
$1,052,081 to $1,418,323, while the benchmark value of a
detached home in Metro Vancouver has risen 37.9 per cent, from
$1,423,500 in December 2019 to $1,964,400 in December
2023.
With rising affluence and one of the largest transfers of
inter-generational wealth now occurring, demand in the luxury
segment is further propping up the renovation/infill phenomenon.
According to the World's Wealthiest Cities Report by international
wealth migration firm Henley & Partners and global data
intelligence company New World Wealth, Toronto now ranks as the 13th
wealthiest city globally for the number of high-net worth
individuals, and their impact on the market is visible. Renovations
and infill continue in Toronto's
and Vancouver's most established
areas at a rapid pace, with older, executive homes carrying
generous lot sizes and substantial price tags being gutted to the
studs or demolished entirely.
"Robust renovation and infill activity and the resulting lift in
detached values has inevitably impacted the urban housing ladder,"
notes Alexander. "For years now, we've heard about the disappearing
or 'missing middle.' Due to rising detached values, that 'middle'
is now more likely to be a linked home, a townhouse or a condo
unit. Amid population growth and urbanization, the shift in
Canada's housing mix has been a
natural and progressive evolution – in much the same way that,
decades ago, the hallmark of middle-class North America stopped being the stereotypical
modest home with a white picket fence."
RE/MAX also found lifestyle trends as well as economic and
social realities have influenced the housing sector to date. For
instance, price growth itself has escalated carrying costs,
prompting the rise of and need for multi-generational housing. A
growing number of property owners are investing in renovations that
accommodate family or create suites that can provide a secondary
income stream to offset the cost of home ownership. Properties with
basement apartments and in-law suites are increasing in demand and
often sell at a premium. According to the 2021 Census, there were
nearly 442,000 multigenerational households in Canada. These only account for 2.9 per cent of
all private households, but are now home to 2.4 million people, or
6.4 per cent of the total population. Multi-generational households
have increased in numbers by 50 per cent since 2001 – much higher
than the 30-per-cent increase in households overall.
"The detached housing supply in urban centres is in the midst of
a monumental metamorphosis that will unquestionably impact housing
inventory and composition for further generations of real estate
consumers," explains Alexander.
Longer lifespan and better health are also allowing homeowners
the option of aging in place, putting greater pressure on housing
supply and disrupting the traditional property ladder. Conventional
home-buying patterns have shifted as a result, with the stay-put
trend catching on with homeowners of all ages, bolstering the
"renovate versus relocate" trend. Others might simply wait longer
to make the next move. Either way, the gridlock in the home-buying
cycle causes knock-off effects that limit inventory and contribute
to higher prices.
"Municipal governments are partially to blame for the decision
to stay put, given the land transfer taxes applicable in both
Toronto and Vancouver," says Alexander. "The tax has
effectively eroded equity gains that, in the past, homeowners
directed toward moving up, down or laterally. It simply costs too
much to make multiple moves. The result is that the rungs on the
property ladder are fewer and moving farther apart."
For their part, homebuyers are adjusting to the changing
landscape in Canada's urban real
estate markets. Variables such as population growth, affordability,
supply, intensification, as well as social and economic factors
will continue to shape the housing sector, the housing mix, and
home-buying trends in the decades ahead.
"Those in a position to make their moves now may be better
positioned than those in 2025, as prices currently remain close to
year-ago levels in the Toronto CMA and modestly higher in the
Vancouver CMA," says Alexander. "Pent-up demand is expected to
increase pressure on the housing market in the year ahead as buyers
move off the sidelines amid a more favourable interest rate
environment that will set the stage for sales and price growth. In
the same vein, better rates will also support renewed renovation
and construction activity, as the evolution of city neighbourhoods
remains a work in progress. Solid fundamentals support the case for
home ownership as a long-term hold. As Mark Twain once said, 'Buy
land. They aren't making it anymore.'"
Regional Highlights
Toronto
Changes to work schedules and the remote phenomenon in the
post-pandemic era have breathed new life into Toronto's downtown neighbourhoods. A
significant influx of young buyers is moving into communities and
homes once inhabited by parents and grandparents. Renovation and
infill activity continues unabated as a result, in neighbourhoods
such as Parkdale,
Trinity-Bellwoods and College Street West, where immigrants
originally settled and raised families at the turn of the
century.
Instead of selling their homes, newcomers kept their properties
and moved north, east and west of the city where houses and lot
sizes were bigger and more conducive to large families, while
renting out their existing homes. Younger generations are now
moving back into those properties, some converting them into
multi-unit dwellings and living in one of the apartments to support
a mortgage, while others are taking homes that had been converted
to multi-family and reversing the trend. Once completed, these
properties look nothing like the homes of their parents or
grandparents, boasting modern construction of steel and glass,
minimalistic interiors and edgy landscaping. Walkability is the
primary driver in busy downtown neighbourhoods, with the grocer,
the butcher, unique shops, restaurants and cafes, as well as
children's programs all within walking distance.
This trend is also visible in areas such as East York, Riverdale and Leslieville, particularly where there are
strips of semi-detached, townhomes and row housing. This is now
commonplace in Toronto's oldest
neighbourhoods as gentrification spills over into areas bordering
hot pockets. St. Clair West between Bathurst and Dufferin has also come alive as
young, established families move into new and renovated infill
properties, stimulating commercial real estate growth in terms of
new shops and restaurants.
The trend builds on what has been occurring in many midtown
Toronto neighbourhoods for
decades, along throughways such as Avenue Road and Yonge Street. Very few bungalows remain in these
enclaves, where buyers typically look to maximize square footage on
generous lot sizes. The evolution of housing stock in these
communities, which began in the 1980s, is almost ready for a second
revival.
The result is older, established neighbourhoods with newly
constructed, custom-built homes that easily rival anything built in
subdivisions currently underway. Renovation and infill activity is
raising the average price of homes one property at a time,
impacting values of surrounding real estate, changing the physical
landscape as well as the mix of the housing supply and homebuyers
in the city.
Vancouver
Renovation, rehabilitation and infill continue unabated in
Vancouver proper, with new buyers
and existing homeowners embarking on renovation projects and
builders looking to increase densification. The trend has been
particularly evident in neighbourhoods in East Vancouver including Grandview, Renfrew, Napier and Hastings-Sunrise, where
laneway homes and coach houses have proliferated. The market is
seeing more duplex, triplex and sixplex projects coming on stream,
as builders move to fill the missing middle.
Red tape and restrictions are making it difficult to subdivide
larger lots, given current zoning in many neighbourhoods, despite
the move toward highest and best usage for properties. The typical
33-ft. lot, however, has experienced increased development with
front and back duplexes over the past four or five years, a trend
that is expected to continue. Detached homes typically known as
'Vancouver Specials' that were popular in the 1960s have also been
replaced by homes that can accommodate more than one family. This
is especially true of homes that are being sold for land value
only, meaning the home itself has met its life expectancy.
Vancouver is rapidly changing
and existing detached homes are seeing upward pressure on pricing,
particularly when renovated to today's standards. Many potential
sellers are choosing to age in place, rather than move to a smaller
home or condominium. Rapid transit is sparking new demand for areas
outside the core.
Interestingly, the City of
Vancouver is seeking to retain character homes, typically
those built before 1940 that represent the original aesthetic of
core neighbourhoods. Those who opt in have the opportunity to: add
additional floor area to the existing home; to convert the home
into multiple units known as a multiple conversion dwelling; build
an infill – a smaller, detached home typically located in the rear
yard where the garage would normally go; or rent or strata-title
dwelling units in the infill or multiple-conversion dwelling.
Despite the intent, the policy has not been enough to deter the
loss of character homes and new policy options are being
investigated. Currently, the city is exploring how to balance
preservation with the need to increase density in existing
neighbourhoods, with a focus—and some controversy—on the permitted
Floor Space Ratio (FSR), with many noting it must be higher to
accommodate future housing needs.
Much like the changing landscape itself, the policy framework
that guides the evolution of the City of
Vancouver is still taking shape, with growing pains evident
in Canada's largest markets. One
thing, however, is certain: maximizing square footage and density
on existing lots will continue to be a growing trend.
About the RE/MAX Network
As one of the leading global real estate franchisors, RE/MAX,
LLC is a subsidiary of RE/MAX Holdings (NYSE: RMAX) with more than
140,000 agents in almost 9,000 offices with a presence in more than
110 countries and territories. RE/MAX Canada refers to RE/MAX of Western Canada (1998), LLC and RE/MAX
Ontario-Atlantic Canada, Inc., and RE/MAX Promotions,
Inc., each of which are affiliates of RE/MAX, LLC. Nobody in the
world sells more real estate than RE/MAX, as measured by
residential transaction sides.
RE/MAX was founded in 1973 by Dave and Gail Liniger, with
an innovative, entrepreneurial culture affording its agents and
franchisees the flexibility to operate their businesses with great
independence. RE/MAX agents have lived, worked and served in their
local communities for decades, raising millions of dollars every
year for Children's Miracle Network Hospitals® and
other charities. To learn more about RE/MAX, to search home
listings or find an agent in your community, please
visit remax.ca. For the latest news from RE/MAX Canada,
please visit blog.remax.ca.
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SOURCE RE/MAX Canada