On a recent fall evening in the upscale Toronto neighbourhood of Forest Hill, four prospective buyers were vying for a gracious two-bedroom condo unit with an outdoor terrace.
The 1,600-square-foot unit was listed with an asking price of $1.6-million. Many empty nesters covet such properties, so real estate agent Andre Kutyan of Harvey Kalles Real Estate Ltd. – who represented one couple at the table – wasn’t surprised to face competition.
But Mr. Kutyan was shocked when he learned that one triumphant buyer had blown past the others with a bid of $2.1-million.
“We were beside ourselves with the price it got – it just doesn’t make any sense,” he says.
Mr. Kutyan says a dramatic lack of inventory in central and north Toronto is driving prices for large condo units upward at an exponential pace.
He estimated the unit at Lower Village Gate would fetch between $1.7-million and $1.8-million, based on previous sales in the building.
“I believe someone paid $300,000 or $400,000 more because they just had to have it,” he says.
Mr. Kutyan says that price has set a new bar.
“It’s going to put upward pressure on the next unit that comes up in the building.”
A large contingent of downsizing baby boomers is seeking apartments of 1,500 square feet and up. They have $1.5-million and more to spend, in many cases, because they’re selling a house in tony areas such as Forest Hill, Lawrence Park or Bayview and York Mills.
It’s a trend Mr. Kutyan sees intensifying as more boomers look to sell their large houses in the coming years.
“We’re at the beginning of this. There are tons of boomers out there who want this,” he says.
Recent market dynamics are not working in favour of the downsizers, says Mr. Kutyan, pointing to one swath of the market around Bayview and York Mills. In early October, buyers could choose from 136 listings with asking prices between $3-million and $8-million.
With so much supply, he points out, many of the empty nesters’ freehold homes have lost value in the past 12 to 24 months. In the best case scenario, the price of the detached house has stayed fairly flat – at the worst it’s tumbled 20 per cent to 30 per cent.
The price of the average condo in the 416 area code of Toronto, meanwhile, jumped 15 per cent in the two years to the end of September.
Robin Pope of Pope Real Estate Ltd. has listed a renovated three-bedroom penthouse at 47 Lower River St. for sale with an asking price of $1.845-million. The two-storey unit has 1,744 square feet of living space.
He figures it’s the kind of spacious unit that will appeal to downsizers.
Mr. Pope says many potential buyers have booked showings and two parties are coming back for a second time. But in the downtown area, he’s finding entry-level units are the most in demand.
“The $500,000 price point is just insanely hot – it’s ridiculous,” he says.
In the Beaches neighbourhood in Toronto’s east end, sales of houses priced at $2-million and up are picking up after a slow couple of years, says Rochelle DeClute of Union Realty Brokerage Inc.
“We’re seeing movement there again.”
But that action is fairly calm compared with the frenzy of 2016 and 2017, she adds.
“We don’t see that same kind of frantic behaviour that we had been seeing.”
She is seeing feverish behaviour in the condo market, however, as first-time buyers try to gain a toehold in the market. Many are buying into projects in the east end, she says, and saving more money during the four or five years the unit is under construction.
“They are frantic to get in there.”
At the other end of the market, where more mature buyers are on the hunt, Mr. Kutyan says he believes escalating prices are prompting downsizers to spend more now.
“There’s a sense of urgency with this demographic. They’re worried they’re going to be too late and miss out.”
In the Lower Village Gate project where Mr. Kutyan’s clients lost out, there have been only five sales in the two buildings in 2019.
Mr. Kutyan’s clients were ready with an offer well above the $1.6-million asking price, he says, because they had lost out on a unit in the same building one year ago and had been looking ever since.
The couple figured they would need to spend a minimum of $200,000 to renovate the unit.
The buyer who prevailed paid $1,312.56 a square foot for the unrenovated unit, Mr. Kutyan points out. The previous highest price in the building was $1176 a square foot, and that was for a renovated penthouse suite.
People who had planned to sell a house, buy a condo and have some money left over to spend in retirement are feeling the squeeze, he says.
“To get anything decent in the city of Toronto, you’re looking at $1,000 a square foot.”
Looking ahead, Capital Economics says the results of the upcoming federal election may bring some changes to the country’s housing market.
Both the Liberals and the Conservatives have proposed policies that could boost house prices after a decade of tightening lending restrictions, senior Canada economist Stephen Brown says.
Mr. Brown adds the effects of the proposals on house prices are likely to be small. Still, Canada’s household debt has continued to increase in the past 10 years, he says, and if the election were to mark the start of a pronounced shift in attitudes toward lending restrictions, it will rise further, he cautions.
Were a future government to loosen lending restrictions, Canada’s economic growth could rise in the short term, he says, but the economy would be even more vulnerable to a negative shock.
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