Ten good houses. That’s all it would take to break the grip inertia has on Toronto’s high-end real estate market.
But finding a handful of owners eager to part with a desirable house in a lovely enclave is proving to be increasingly difficult.
“We’re in a vice,” Jimmy Molloy of Chestnut Park Real Estate Ltd. says of the tight inventory.
Meanwhile, a healthy economy and robust immigration are contributing to rising demand from buyers. Foreign investors also view the city’s market as reassuringly stable – without as many punitive taxes as the Vancouver area’s housing market.
Mr. Molloy knows some well-off baby boomers who are mulling over the possibility of selling. He assures them, “we’re very confident we can sell your house.”
The homeowner’s usual reply is, “but where are you going to put me?”
And that creates the jam in the high-end market.
“It’s a real conundrum – how do you counsel sellers?” Mr. Molloy says.
He understands fully why emptynesters who are comfortable in their home don’t want to give it up.
“They’re very happy having their spare bedrooms for their grandchildrens’ visits,” he says. “None of the baby boomers are selling their big houses.”
At the same time, the lack of inventory discourages some affluent buyers from even looking because they don’t see much selection. That in turn suppresses supply because they’re not listing their existing houses.
That lack of movement is not only at the high end: The same dynamics play out all through the market, Mr. Molloy says.
He believes a fresh batch of properties in such carriage trade neighbourhoods as Rosedale, Forest Hill and Yorkville would stir things up.
“You need a little momentum to get the market going,” he says. “You need 10 good houses. Then you would see real excitement.”
Compared with the month of January in many previous years, the winter so far has been fairly benign, Mr. Molloy says.
“The weather is certainly co-operating,” he says. “They will be able to find your house – there are no snow banks.”
Paul Maranger and Christian Vermast of Sotheby’s International Realty Canada also note that listings this January are particularly slim compared with other years.
“What we don’t have this year is carry-over supply,” Mr. Maranger says.
Mr. Maranger and Mr. Vermast say houses that don’t sell in November and December typically remain on the market in the New Year. And the usual December slowdown didn’t happen in 2019.
“This year we had an abnormally strong December,” Mr. Maranger says.
Despite the lack of supply at the high end – above $5-million or so – buyer’s generally have leverage, the pair say.
“They can negotiate. They can take their time – there’s no urgency,” Mr. Maranger says.
Many prospective buyers in that price range are business owners, say Mr. Maranger and Mr. Vermast, and while the Canadian economy is strong, it’s not as strong as the U.S. economy.
They add that agents expect that expensive homes take longer to sell.
Bespoke houses can be quite idiosyncratic, they add.
“When someone is building their own home, they’re building their dream,” Mr. Maranger says. “You’ve got to parlay that over to a buyer who has the same dream.”
Mr. Maranger and Mr. Vermast point out that condo units have risen so dramatically in value that the price a square foot in some cases sometimes exceeds that of a single-family house in the same area.
“The condo market has done disproportionately well,” Mr. Maranger says.
The disparity in prices is tilting the market back towards a preference for detached and semi-detached homes.
“It’s there,” Mr. Maranger says of the tipping point."We’ve had these conversations with people."
The agents say that some owners of large houses who had considered downsizing into a condo are now thinking of moving into a smaller, more urban house instead.
They recently sold a laneway house behind Queen Street West for $2.3-million, which works out to approximately $1,000-a-square-foot for the house and land. The house at 5 Euclid Place was listed with an asking price of $2.498-million.
A renovated Victorian in Little Italy sold for a similar price a square foot. The house at 428 Euclid Ave. was listed with an asking price of $3.799-million and sold for $3.65-million.
By comparison, a luxury condo unit typically fetches $1,500 to $1,600 a square foot downtown, with units in five-star buildings such as the Four Seasons going for even more.
Sotheby’s International Realty Canada recently reported that sales above $4-million in the Greater Toronto Area (GTA) dipped three per cent in 2019 from 2018. For the city of Toronto, the tranche above $4-million rose five per cent last year compared with 2018.
Sotheby’s noted in its Top-Tier Real Estate Report that the migration of luxury real estate away from the Multiple Listing Service of the Canadian Real Estate Board to more exclusive platforms skews the data.
For example, condo sales above the $4-million mark in the GTA plunged 41 per cent last year compared with the previous year but that number reflects the fact that buyers and sellers leaned towards exclusive deals, Sotheby’s notes.
The top-tier condo market has benefitted in the GTA from strengthening interest from prospective domestic and foreign investors dissuaded by the plethora of recent taxes and policies in Vancouver targeting unoccupied housing and foreign ownership, Sotheby’s says.
Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.