The Toronto-area real estate market is ending 2021 with a burst of energy from buyers who want to clinch a deal before the year ends.
Manu Singh, a real estate agent with Right at Home Realty Inc., has seen market psychology change all through the fall. In early December, he senses that some buyers are rushing towards the finish line.
“The market is very confusing,” he says. “The ebbs and flows are not tied to seasonality.”
Mr. Singh believes the lack of inventory, the threat of rising interest rates and an expected increase in immigration are all contributing to market sentiment.
“Buyers are more reactive to news,” he says. “It changes from week to week.”
Mr. Singh points to his own listing at 3 Nordic Place in North York. He listed the three-bedroom, detached house for sale with an asking price of $1.548-million about two months ago.
“Right before we put it on the market, there was extreme action in that pocket,” he says.
When he says “extreme action,” Mr. Singh means buyers were rushing into bidding melees and paying huge amounts above asking for houses in the area near Lawrence Avenue East and the Don Valley Parkway.
But that segment of the market seemed to enter a lull right about the time 3 Nordic landed on the market, says Mr. Singh.
“We had lots of showings but no bites,” he says of that stretch. “Buyers seemed very apprehensive.”
Over the next few weeks, some buyers submitted offers but they didn’t satisfy the sellers.
Mr. Singh was surprised because the house is two stories and renovated, whereas many nearby houses were smaller, with more dated decor.
“A lot of houses in that area are bungalows with green carpeting and pink bathrooms,” he says.
Towards the end of November, Mr. Singh reduced the asking price to $1.529-million.
“It wasn’t a massive drop but all of a sudden we had a huge uptick in showings,” he says.
At the same time, he made the house available for lease. The owner was willing to go with a lease or a sale – whichever seemed more advantageous, he says.
“It can be a nice way to tide over the outrageous fluctuations,” he says of the market’s shifting psychology.
Soon after those changes, the seller received three offers within one-and-a-half days. Two bids came from buyers and one from a renter who offered more than asking for the lease.
The homeowner accepted an offer to buy for $1.520-million with a quick close in January.
“It was quiet for so long and then there was an uptick,” he says of the sudden flurry of offers.
Mr. Singh figures the possibility that the house might be snapped up by a tenant motivated some buyers who had been on the fence.
Also, economists have been warning that interest rates will likely be on the rise in 2022. Some big banks have already begun to raise mortgage rates, he notes, and buyers with pre-approved mortgages are anxious to take advantage of them.
Mr. Singh believes those two factors played a bigger role in attracting buyers than the price tweak.
“I don’t really see a $20,000 price drop moving the needle.”
Figures from the Toronto Regional Real Estate Board also show a brisk year-end: Sales in the Greater Toronto Area set a record for the month of November with a 3.3 per cent rise from the same month last year. Sales decreased 2.5 per cent from October’s level on a seasonally-adjusted basis. Listings shrank again in November, according to TRREB, with a 13.2 per cent drop from November, 2020.
Lots of buyers chasing few properties pushed the average price to a new peak of $1,163,323 in the GTA. That marks a 21.7 per cent jump from November of last year.
Looking ahead, Mr. Singh expects buyers to keep a keen eye on interest rates and levels of inventory.
Some will take a breather over the holidays, he figures, so he’s setting up meetings for January with potential sellers.
“They see upward momentum and they all want to take advantage of it in January and February,” he says of the homeowners planning to list early in the New Year.
Elli Davis, a real estate agent with Sotheby’s International Realty Canada, says she doesn’t step back from listing in any season or for any of the holidays throughout the year.
And while Ms. Davis thinks it’s a good idea to sell in December when fewer competing properties are arriving on the market, some sellers hesitate to list if they believe the buyer pool might be smaller, she says.
“Sometimes you have to convince them that it’s correct.”
During November, Ms. Davis sold a two-bedroom condo near Hoggs Hollow two days after it arrived on the market.
Unit 407 at 3900 Yonge St. sold for $987,000 after being listed with an asking price of $995,000.
At 5 Rosehill Ave., unit 918 was listed with an asking price of $1,195,000 and sold for $1,150,000.
In an older boutique building at 319 Lonsdale Rd., unit 1C sold for $1,320,000, or slightly below the asking price of $1,349,000.
Ms. Davis has a handful of properties arriving on the market in December.
Last week she listed a three-bedroom condo at 70 Rosehill Ave. with an asking price of $5.495-million. Unit 503 has 4,200 square feet of space and a view of the city skyline.
At One Forest Hill Road, Ms. Davis is listing a two-bedroom unit with an asking price of $3.995-million. The unit, on the 11th floor of the recently – completed building, has a north-west view.
Ms. Davis says some homeowners prefer to wait until the New Year to sell: She had the pools and gardens of two properties photographed in October so that she can include the photos when she lists the houses in January and February.
Ms. Davis says she is working with buyers in different price segments and neighbourhoods who will list their current properties if they can find the next one.
“I have 10 to 15 active, ready buyers right now,” she says. “They’re not selling before they’re buying.”
Others are not listing because finding a new place is so challenging.
“I think a lot of people have decided to stay where they are and renovate – or put their plans on hold,” she says.
Stephen Brown, senior Canada economist at Capital Economics, expects house price inflation to slow sharply in 2022.
He points out that the Bank of Canada is growing more concerned about the run-up in the housing market, and especially about the rising share of purchases made for investment purposes.
Mr. Brown believes investors’ optimism may explain some of the strength in house prices this year, but he doubts that’s the reason for the bump in sales and prices in October and November.
He thinks it’s more likely that the jump in mortgage rates has pushed people with pre-approved mortgages to buy a house very quickly.
As rates were still low in September, there are probably still many buyers hoping to strike a deal before their pre-approvals expire, he says, adding that prices may head higher still in the remaining weeks of the year.
House prices look extremely stretched relative to implied affordability, Mr. Brown says, and that gap will widen as mortgage rates rise further.
As a result of these factors, Mr. Brown predicts price growth will lose steam, but if that doesn’t happen, the central bank may become more hawkish.
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