The Toronto-area real estate market remains in stasis this summer as buyers chase more frivolous distractions and sellers sit and wait. But at times, there are bursts of frenetic activity.
Sydney Taylor, a real estate agent with McCann Realty Group, is working with one couple who began looking for a semi-detached house in February when the market was blazing.
As the Bank of Canada raised its key lending rate four times between March and July, their buying power diminished.
“The mortgage rate increase has lowered their budget,” Ms. Taylor says.
The couple switched their search to condo apartments instead and recently ended up competing with five rival bidders for a penthouse on Queen Street West.
The two-bedroom unit at the Chocolate Company Lofts across from Trinity Bellwoods Park was listed with offers welcome anytime.
The penthouse arrived on the market on a Friday but Ms. Taylor’s clients were not available to see it until the Sunday. The couple liked the layout and large terrace, and Ms. Taylor thought the unit was very reasonably priced. They rushed to submit an offer that evening with a deadline the same night for the sellers to accept. During that short window, one other bid landed.
The following day, the clients submitted a new offer but, with competition at the table, Ms. Taylor knew they would have to make their irrevocable period longer. During that time, the listing agent was able to drum up four additional offers for a total of six.
Ms. Taylor’s clients offered slightly below the asking price around the $1,050,000 mark, but they were outbid. The unit sold for $1,180,000.
“We weren’t even in the running,” she says.
Ms. Taylor says the sale is a useful barometer for the current market: coveted properties are selling but buyers are hesitant to jump into a competition.
“They might have just been waiting to see how it would play out,” she says of the bidders waiting in the wings.
Some buyers wait until after an offer date, figuring they will have more leverage in bargaining if the property failed to sell by the deadline.
Ms. Taylor says some condos are sitting for long stretches but large units in good locations still often move quite quickly.
Another cohort looking for condos is the homeowner with an empty nest and a large house to sell.
Ms. Taylor is working with a couple in that segment who missed out on a large unit near Bayview and Sheppard avenues.
That property, listed just above $800,000, drew two offers and sold for the full asking price, she says.
Meanwhile, Ms. Taylor was keeping an eye on a three-bedroom house in Leslieville that had been sitting on the market after being listed with an asking price of $1.567-million. Ms. Taylor took the clients who missed out on Queen Street to see the property after the price had been cut twice and stood at $1.199-million.
The house ended up selling for $1.1-million.
“I think the agent had it priced incorrectly from the start,” she says.
Ksenia Bushmeneva, economist with Toronto-Dominion Bank, says the real estate market across the country has continued to cool and the Bank of Canada’s supersized 1-per-cent rate hike in July will weigh it down even more. She expects the central bank to continue to take rates higher through the rest of this year – though perhaps at not such a break-neck pace.
As a result, she expects further declines in home sales and prices.
In this environment, Christian Vermast and Paul Maranger of Sotheby’s International Realty Canada say sellers should aim to have a property that stands in the top 10 per cent of its category in order to attract the eyes of buyers.
In other words, the home or condo must be priced to today’s market conditions and also have attributes like a good location, high-quality finishes and polished presentation.
“It’s the mediocrity that’s going to languish,” Mr. Maranger says.
In February, the market in the Greater Toronto Area had less than one month of inventory (a measure of how long it would take to sell all active listings at the current pace of sales). At the end of July that figure stood at 2.5 months.
“It’s the abrupt nature that shocked people,” Mr. Maranger says of the sudden slowdown.
Mr. Maranger points out that sales in the GTA have been extremely slow in July in all price segments – falling roughly 50 per cent from the same month last year – and he expects August to remain sluggish.
“Buyers are not putting an opportunistic buying cap on yet,” Mr. Vermast says.
Still, 23 properties did trade hands above the $3-million mark and, on average, they sold for 96 per cent of the asking price.
“There’s certainly no panic yet,” he says of sellers.
The agents are advising clients to sell an existing property before buying a new one.
“You really have to sell first unless you have the financial wherewithal and stomach to hold two properties,” Mr. Vermast says.
The two agents are receiving lots of calls for evaluations and they anticipate a busy fall with listings. Some sellers will move because of a new job or circumstances, they say, and others will need to list because of financial stress.
The agents say the sellers facing hardship will be more motivated to sell and will therefore set realistic prices.
“Those are the properties that are going to go first because they’re going to be priced very sharply,” he says. “The over-priced and mediocre will sit and sit and sit and they will artificially inflate inventory.”
Mr. Maranger says the conversation now with homeowners revolves around “how motivated are you? How patient are you? How much time do you have?”
Meanwhile, the rental market is absurdly strong, they say, and many sellers may decide to take on tenants instead.
The agents recall the downturn of 2008 when homeowners would list their house with a sign that says ‘for sale or for lease.’
“We’re going to start to see that again.”
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