A fundamental shift in buyer behavior is disrupting the traditional property ladder progression in Canadian real estate, according to industry veteran Michael Phinney, President and CEO of Phinney Real Estate. This disruption is creating a ripple effect throughout the market, affecting everything from entry-level condos to luxury properties.
The Stalled Domino Effect
“There’s sell first, buy later mentality, and a lot of people until their houses start to sell, that domino effect isn’t really taking place,” Phinney explains. This break in the traditional buying chain is having far-reaching implications across all market segments.
Traditionally, the real estate market operates like a series of connected dominoes: condo owners upgrade to townhouses, townhouse owners move to detached homes, and so on. However, Phinney observes this pattern has ground to a halt.
The Condo Market Bottleneck
“Because the condo market is the slowest segment of the market, it’s taking longer to sell homes, and it’s very price sensitive,” Phinney notes. This slowdown at the entry point of the property ladder is creating a bottleneck that affects the entire market.
The impact is evident in Phinney’s own business. “Part of the reason we are carrying more inventory than usual, things are just not turning over as quick as they’ve had before,” he explains. His team, which typically ranks among Royal LePage’s top five in Canada, currently manages about 70 listings, an unusually high number that reflects the broader market slowdown.
Higher-End Market Impact
The effects of this broken chain extend beyond the entry-level market. “A lot of eyes on our higher end listings, but until some of these properties are selling in that next move-up class, it’s a slower segment of the market,” Phinney says.
This observation suggests that even qualified buyers at higher price points are hesitating to make moves, creating a cascade of delayed transactions throughout the market.
Market Adaptation
Successful navigation of the current market requires a different approach than during more fluid times. “Sometimes it’s more motivated sellers that are getting it sold right now in this market,” Phinney notes, highlighting how price sensitivity has become a crucial factor across all segments.
The Role of Financial Stability
Drawing on his firm’s 42-year history, Phinney emphasizes the importance of financial stability in weathering market transitions. “We’ve been fortunate to be backed with good financial means to be able to push our marketing and do the things that we need to do to keep promoting our clients’ listings,” he says, noting that many companies struggle to maintain consistent marketing efforts during market slowdowns.
Looking Forward
While the current market presents challenges, Phinney sees potential catalysts for change on the horizon. “I wouldn’t be surprised if at the end of July there’s going to be another rate cut which would be good for the real estate market in general,” he suggests.
This potential rate cut, combined with current high inventory levels, could help restart the stalled domino effect. However, until the entry-level market begins moving again, the traditional progression patterns in Canadian real estate may continue to face disruption.
