More Ontarians have been delaying purchasing new or pre-construction homes, and the flight from urban centres due to the COVID-19 pandemic may have reversed, according to a survey by the Ontario consumer protection agency Tarion.

If the results are extrapolated to the entire province, the number of Ontarians "very likely" to buy a newly built (less than five years old) or pre-construction home plunged from approximately 750,000 to under 500,000 year-over-year, the report states. It represents a 34 per cent decline.

“It’s a data set that really reinforces some of the overall narrative that we’re seeing, which is how market uncertainty affects housing. I think it really drives the point home that it’s not just (a) supply question but demand question as well,” said Tarion CEO Peter Balasubramanian in an interview with RENX Homes.

In a potential reversal of a COVID-19 pandemic trend, when there was a spike in interest in homes outside of major cities, the new report cites increasing demand in urban centres.

The survey conducted by Environics Research included responses from 538 adults in November 2023 who said they had intended to purchase a pre-construction or existing home.

New homebuyers lose some appetite

The survey showed that over the next six months, fewer prospective buyers intend to be in the market. The number of people intending to buy in the next three to six months fell from 10 per cent a year ago to nine per cent in 2024, and those intending to buy within three to six months dipped four per cent to 25 per cent.

Down the road, however, the desire to buy actually strengthened. The number of respondents who would like to buy in the next six to 12 months went from 61 per cent in 2023 to 66 per cent in 2024.

The survey matches data from Statistics Canada that reported home purchase intent in Ontario slumped by 25 per cent during the past year, as inflation, interest rates and low consumer confidence impact the economy, the report states.

Despite consumers feeling the effects of the economy, their desire for new homes has not waned. Ninety-three per cent said they are likely to consider a home built within the last five years in 2024, increasing from 91 per cent in 2023.

Balasubramanian said Ontarians may be sidelining home purchases to await an anticipated decrease in interest rates “right around the corner” or are managing the psychological impact of economic uncertainty.

A question raised by the retreat in purchasing intent, however, is how a wave of hundreds of thousands of people returning to the market would affect inventory and pricing, he added.

Homebuyers get younger, less interested in suburbs

The proportion of first-time homebuyers increased year-over-year, going from 35 per cent in 2023 to 39 per cent in 2024. Repeat buyers remained the majority in 2024 at 61 per cent.

Younger homebuyers and newcomers to Canada entered the market in larger numbers. Gen Z went from three per cent to eight per cent of homebuyers, with millennials remaining the majority at 54 per cent. People who spent less than 10 years in Canada grew substantially, from 39 per cent of homebuyers in 2023 to 56 per cent in 2024, pushed by immigration and international students.

Fully detached homes are the most popular type of home (69 per cent) while interest in condos fell to 27 per cent from 32 per cent. While respondents expressed a desire for more floorspace, demand for a home in the suburbs fell to 49 per cent in 2024 from 57 per cent in 2023. Now, urban areas are the most popular type of community for a home.

“A year ago it wasn’t clear — was this going to be a permanent trend or not? But now we’re starting to see a bit of a rebound; the urban focus is returning,” Balasubramanian said.

Though Tarion is unclear about the reasons, it speculates changes in work practices such as reversals in work-from-home policies or buyer’s remorse from commuters unhappy with long travel.

New home purchasers’ moving intentions remain relatively stable: 53 per cent of respondents considered staying in the same town or city; 47 per cent want to move within Ontario’s regions.

What homebuyers want

Most homebuyers remain focused on living in their home at 83 per cent, while 14 per cent plan to use the home as an investment.

The most important factors for a new or pre-construction home were:

• price (98 per cent);
• size (96 per cent);
• energy efficiency (92 per cent); and
• style or design (92 per cent).

Balasubramanian said the demand for energy efficiency stands out, as 15 to 20 years ago, such an issue would have not been a key matter. He suspects Gen Z’s focus on environmentalism may be pushing energy efficiency.