The buyers’ malaise that permeated Toronto’s real estate market last week appears to be deepening. Sellers in some cases are vociferously demanding more cash if bids don’t match their expectations.
The shifting dynamics are creating tension in a market where properties in some pockets sell for insane amounts while others don’t sell at all.
One reader wrote of his experience trying to sell his detached house in the city last week.
“We did all the usual things and only had eight people through by appointment and didn’t receive a single offer,” wrote the seller, expressing relief that the problem seems to be a change in market mood – not an unappealing property.
Some agents think buyers may have taken a pause before a rush of new listings follows the Easter and Passover holidays. But there’s also uncertainty surrounding measures that governments may take in an attempt to cool the market. With so much conjecture swirling about the possibility of imposing taxes on speculators, foreign buyers or investors, it’s not surprising that some house hunters might want to see how things shake out.
Following this week’s meeting between Toronto Mayor John Tory, federal Finance Minister Bill Morneau and Ontario Finance Minister Charles Sousa, Mr. Sousa said the province will be introducing comprehensive measures to cool the market in the next budget.
In Toronto, real estate agent Anita Merlo of Bosley Real Estate Ltd. says that some houses are not selling on the day scheduled for offers because “the sellers did not get the number they wanted.”
In other words, they want to hit a certain target for the sale price instead of accepting what the market is offering.
She knows of one listing where the owner received six offers and sent all of the bidders’ agents back to ask their clients to come up with a higher figure. In some cases, it’s the seller’s real estate agent who is aggressively pushing for “more money, more money” when they see the offer, she says.
Ms. Merlo fears that some of the frenzied activity comes from sellers dictating the amount they want to receive. Inexperienced agents just end up as order takers. Buyers and their agents in turn are frustrated by being sent back two or three times to “improve” their offers. She recently sold a house in the Wychwood area with the caveat to the buyers’ agents that they would have only one shot. She figures she got a higher sale price and also streamlined the process for everyone by not going in for additional rounds of bidding.
In areas outside of Toronto, prices are still escalating rapidly, and there are few signs of waning buyer enthusiasm.
“We have not seen that in Mississauga and Oakville,” says real estate agent Matthew Regan of Royal LePage Real Estate Services, who describes the market as “chaos” for buyers.
He recently sold a four-bedroom house with a deliberately low asking price of $899,000. Nevertheless, he was shocked when the house sold for $1.3-million with 27 offers. And that’s not an unusual deal: Mr. Regan describes the house as “generic” in an average neighbourhood with average schools.
“What are we left with? There were 26 other buyers who could afford $1-million or more who couldn’t buy a house. There aren’t 26 other houses,” he says, pointing to very tight supply.
He also wonders if lending practices are strict enough, given how rich the market has become.
“Is $1-million really that easy to get your hands on?”
Mr. Regan says he worries for area residents making average salaries – a school teacher, say – who can no longer afford to buy.
“It’s almost a bit scary when you see the money that gets thrown around for these houses.”
He hears the talk of the Greater Toronto Area and surrounding cities as rising in international stature, but the people who live and work in this country aren’t seeing their incomes rise at anywhere near the same clip as real estate prices. Many people also have high costs for food, day care and taxes, he points out.
“The average person can’t live in the GTA. It’s mind-boggling.”
Still, he’s not sure that the policy changes being floated would be successful in cooling the market to the right degree.
“I’m a bit nervous when a government gets involved or tries to change a free market. I think it can be a slippery slope.”
Mr. Regan says he doesn’t see a lot of foreign buyers in south Mississauga and nearby areas. He doesn’t think a tax on overseas buyers would be terribly effective because he doesn’t believe that segment is driving the market. The notion of a vacant home tax is interesting but likely would be tough to uphold, in his opinion.
As for tightening up the flow of cash, a change in lending practices could hurt areas outside the hottest markets, Mr. Regan adds.
“Why should the rest of the country suffer for Vancouver and Toronto’s markets?”
But if some buyers are hesitant, others see that pause as the opportunity they have been waiting for.
Last week, a semi-detached house at 1257 Dundas Street West received three offers and sold for $1,060,500.
The sellers are Jamie Webster and Dave Colangelo, who met when they played on the same soccer team at five years old. In 2009 the long-time friends decided that teaming up was the best way to get on the property ladder. They paid $399,000 for a red-brick Victorian wedged between two storefronts on a stretch of Dundas that was still very “up-and-coming” at the time.
“Already, young people had to be creative in what to buy,” says Mr. Webster. “If you partner up there’s an opportunity to get in.”
The two friends figure that getting into the market at a young age proved to be a good investment for them when some of their cohort weren’t even thinking about real estate yet. When they bought the house , that stretch of Dundas was home to just a handful of sports bars and some old shops catering mainly to the local Portuguese community.
But the two already knew some pioneering bar owners who were migrating to the area. Mr. Webster paid much of his way through OCAD by bartending and making some money as a DJ. They made the plan work by renting out the third bedroom and even the basement at times. They were flexible with couch-surfing friends and significant others.
“All of us are just art school kids,” says Mr. Webster.
The house had some nasty broadloom, but ripping it up revealed the hardwood underneath. Mr. Webster and Mr. Colangelo did some painting and landscaping and upgraded all of the major systems. Now Dundas West has exploded with bars and restaurants and the area’s properties are in high demand.
The two had talked to real estate agent Nicholas Bohr of ReMax Hallmark Realty Ltd. about selling some time ago, but he advised them to hang on a while longer.
They decided it was definitely time to sell this year when they made long-term commitments: Mr. Colangelo is teaching film studies in Portland, Oregon and he married last year. Mr. Webster is a creative director in Toronto who recently became engaged.
When it came time to sell, he used the common strategy of setting the asking price of $799,900 below the expected sale price and held off offers for one week. With the sale completed, Mr. Colangelo has already purchased another investment property in Toronto. He and his wife plan to buy a house in Portland as well, since he’s on tenure track at the university where he teaches.
Mr. Webster says he and his fiancée will rent for a while and possibly buy another house in a year or so.
“Nothing has to be forever,” says Mr. Bohr of the decision to invest. “It can be a stepping stone.”Report Typo/Error