Many people who keep watch over Canada’s real estate market are looking at the rising numbers of condos for sale in downtown Toronto and wondering what impact that swelling inventory will have on the psychology of buyers and sellers.
Scott Ingram, a real estate agent with Century 21 Regal Realty Inc., is keeping a close eye on listings in condo land too – but with a twist.
Mr. Ingram says the “new listings” statistic is showing a lot of churn happening behind the scenes.
Nearly half of “new” listings for condo apartments and condo townhouses in the 416 area code last month were actually relistings of the same property, he says. The number of listings cancelled each month has been climbing since April to reach 2,529 in September.
Mr. Ingram explains that when the Toronto market is as sizzling as it has been in recent years, people are accustomed to properties selling quickly. So if a house or condo has been lingering longer than a couple of weeks, agents often worry that potential buyers will think there’s something wrong with it.
To keep it looking fresh, the agent will cancel the listing on the Toronto Regional Real Estate Board’s Multiple Listing Service and bring it out again under a different number.
One common reason for a relisting is that the agent priced the property with a low asking price and an offer date. If offer night comes and goes with no bidding war, the listing will be cancelled and the property relisted at a higher price.
The practice inflates the new listings statistic, making it appear new listings are flooding the market.
When the new-listings number spikes, Mr. Ingram views that as a sign that agents are trying different strategies and prices.
“My overall hypothesis is, when the market’s hot, no one needs to relist because your Plan A always works,” he says. “Agents are having to go to Plan B and Plan C in all of this.”
Sellers in the downtown condo market are suddenly battling on many fronts: The coronavirus pandemic made high-rise living less desirable to many, and the economic fallout left many tenants without jobs.
Meanwhile, changes to short-term rental regulations mean that some landlords who rented out their units on platforms such as Airbnb no longer have that option.
Some owners are fleeing the city and selling their units because they choose to; some investors are listing units for sale because they can no longer afford to carry them as rents decline amid falling demand.
Meanwhile, immigration has nearly halted and foreign students are staying away.
All the uncertainty is keeping some potential buyers on the sidelines as they wait to see if prices will fall.
Mr. Ingram explains that some agents will also cancel and relist if they want to reduce the price without tipping off potential buyers, who may see a price cut as a sign of weakness.
“It’s a weird game because you could just do a price change,” Mr. Ingram says. He points out, however, that the “days on market” would keep ticking up if the agent simply adjusted the price.
By cancelling and relisting, “the clock resets that back to zero”.
Mr. Ingram says that knowing the true number of days on market – and also knowing that the price has been cut – gives an educated buyer more leverage. Buyers can do some research themselves and a good agent will pull up the listing history.
“I’m always looking for any angle I can.”
There’s another measure Mr. Ingram uses to detect quick changes in market sentiment: He compares the number of cancelled condo listings with the number that are actually selling.
In September, in the 416 area code, the ratio of cancelled listings to sales stood above 140 per cent. Halfway through October, condo relistings as a percentage of sales reached 163.
“It’s getting worse,” Mr. Ingram says. “It’s noticeably creeping up.”
To compare a bit of recent history, it was detached and semi-detached houses that softened noticeably in the spring of 2017, after the Ontario government introduced a foreign-buyers tax and other measures designed to cool an overheated market.
After the plan was introduced that April, new listings as a percentage of sales rose on a weekly basis until they hit 116 per cent in June.
A more meaningful statistic than new listings, in Mr. Ingram’s opinion, is months of inventory, which estimates how many months it would take to sell active listings at the current pace of sales.
For condos in the Greater Toronto Area, that figure stood at 3.1 months in September.
But the figure varies significantly in different areas.
South of Bloor, for example, months of inventory swells to more than five in some pockets, which makes those areas much more of a buyer’s market, Mr. Ingram points out.
Mr. Ingram believes some of the pent-up buyer demand left over from the spring shutdown has now been spent. “There’s way more inventory now.”
Mr. Ingram is advising sellers to be realistic about prices. In areas with high inventory, they can’t expect to match the price their neighbours achieved in March.
Recently, he listed a unit for sale in a Liberty Village high-rise. When he checked the available listings in the three-tower project, there were 30 others for sale and six of them were the same size as the unit he was listing.
Mr. Ingram advised the owners to list the unit at $599,000 and hold an offer date. The price was below that of the competing units, which were clustered around the $640,000 mark or higher.
The strategy worked: The unit sold for $641,000 on offer night. Mr. Ingram says that was a little below the $650,000 or $660,000 the sellers had been hoping for, but he believes it was the best outcome. The couple now has the unit sold and they can go ahead and purchase a house in the suburbs.
One month later, none of the other, higher-priced units have sold – and a couple of them have reduced their asking price to below $640,000. Some have accumulated “days on market” of more than 50.
Mr. Ingram says properties may sit until one motivated seller – perhaps they lost their job or they can’t afford to carry a unit with negative cash flow – caves and sells for less.
“If one person drops their price, it’s kind of a race to the bottom. You don’t want to be the person chasing the prices down,” he says. “I like to be out ahead of it.”
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