The Toronto-area real estate market appears poised for a quick start to 2020.
David Fleming of Bosley – Toronto Realty Group Inc. has already seen some signs that new buyers have entered the market this year. He’s seen only a sprinkling of new listings, however.
The tone has been set by the sprint to the finish that ended 2019, he says.
“I’m shocked at how strongly the year finished. For me it’s a sign of things to come.”
Stephen Poloz, governor of the Bank of Canada, said recently that he’s on the alert for froth in the Canadian market after the 2019 rebound.
Mr. Fleming stresses that 2020 won’t see the unharnessed run-up in prices that characterized early 2017, but a couple of sales have already raised eyebrows.
In one case, a tiny townhouse arrived on the market with an asking price below $600,000 and no offer date.
“It sold before I could even get into it,” Mr. Fleming says.
Judging by the handful of sales so far, buyers pounce quickly and offer amounts that surprise seasoned agents.
Mr. Fleming recalls similar dynamics in the opening weeks of 2017.
“That was in January when we all said, ‘Wow, something weird is happening.’”
Another harbinger is the ratio of sales-to-new-listings. In December it stood at 125 per cent, Mr. Fleming estimates. The last time the barometer was that high was in December, 2016, when it stood at 127 per cent.
“And what happened to start 2017?” Mr. Fleming queried in a recent blog post.
Mr. Fleming is not predicting a return to that frenzy, when prices were rising more than 30 per cent year-over-year. But buyers seem motivated, he says.
In one recent example, Mr. Fleming listed a two-bedroom condo for sale in Toronto with an asking price of $799,000 in December. The plan was to set an offer deadline with the hope that buyers would offer more than the asking price for the 1,000-square-foot unit.
A similar unit in the building had recently sold for $850,000.
The offer day came and went without any bids.
“Wrong time, wrong strategy – perhaps,” Mr. Fleming said.
But in January, he listed the same condo again for the $850,000 that the owners hoped to fetch. The unit sold within two days for the full asking price.
Mr. Fleming doesn’t have any explanation for why the condo sold so quickly at the higher price except that he believes that new house hunters are entering the market.
“It’s a new year – let’s start our search,” is the thinking of many first-time buyers, he senses.
Mr. Fleming says the very scarce supply prompts buyers who enter bidding contests to bolster their budgets. That in turn sets higher expectations for the next property that arrives on the market.
“Everyone is bidding a little bit more and the house is going to sell for more.”
Mr. Fleming encourages clients entering the market for the first time to begin their search early. If they delay, they will be paying one or two per cent more in the spring, he predicts.
“If you’re a first-time buyer, hit the ground running in January.”
Sal Guatieri, senior economist at Bank of Montreal, points to a drop in mortgage rates and rapid population growth as the main drivers of Canada’s re-energized housing market in 2019.
While the country’s economic growth cooled further in 2019, he says, the housing market strengthened as other sectors weakened.
Mr. Guatieri believes the fastest rate of population growth in three decades – at 1.5 per cent on a year-over-year basis – should keep the upswing in the housing market going. The pace of growth will likely be more modest in 2020 than in 2019, he cautions.
Robert Hogue, senior economist at Royal Bank of Canada, calls the shrinking inventories the main story in the Toronto area. He points to December, when new listings dropped 18 per cent from the same month last year and active listings plunged 35 per cent in the same period.
Meanwhile, sales in the Toronto Area rose 17.4 per cent in December from the same month last year.
The MLS House Price Index Composite Benchmark for the Greater Toronto Area rose 7.3 per cent from December, 2018, Mr. Hogue notes, which is the strongest gain for that measure since November, 2017.
Mr. Fleming believes prices for detached houses will continue to recover in 2020 after that segment gained a little bit of ground last year.
“I think this is the year where detached has to pick up.”
Another element that Mr. Fleming will be watching for in 2020 is the potential for new taxes on real estate. Various levels of government have floated the possibility of a vacant home tax or a speculation tax.
Those levies would be in addition to the increased property taxes that Toronto residents will be paying this year, he adds.
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