The Toronto area’s rocky fall real estate market is seeing sellers become more determined as the end of the year approaches.
Buyers are unpredictable: Some properties sell in one day while others languish.
Pritesh Parekh, a real estate agent with Century 21 Legacy Ltd., believes November may bring more price cuts from sellers who do not want to have their property remain on the market through the end of the year.
That would be an extension of the trend that saw homeowners cutting prices during the uncertain period leading up to Oct. 25, when policy-makers conferred about the Bank of Canada’s key interest rate.
“October was a month when I saw many, many price reductions.”
Mr. Parekh says some sellers who started out with an asking price they thought was in line with market value early in the fall needed to gain some traction as sales slowed and listings grew.
Those who had already bought another property were often motivated to accept less than their original asking price.
“It comes down to, what is your appetite to continue to hold the property?”
Mr. Parekh says some buyers are taking the opportunity of softer prices to move up. While their existing home may have dropped in price, the more expensive house will typically drop by a greater amount because the buyer pool is smaller.
Mr. Parekh recently sold an older condo in Richmond Hill after listing the two-bedroom unit with an asking price of $568,000. He then cut the asking price to $548,000 to bring a fresh set of buyers to view the listing.
The sellers had purchased another home and were keen to have the condo sold, he says, so they were willing to accept a buyer’s offer of $518,000.
“It was a prudent decision for this seller,” he says. “They got done what they needed to get done.”
Mr. Parekh says the central bank’s decision to hold its benchmark rate at 5 per cent is a relief for borrowers with a variable rate mortgage.
And while some move-up buyers welcome the stability of a rate hold, a purchase remains out of reach for many aspiring buyers.
“It hasn’t moved the needle for first-time buyers,” he says.
Mr. Parekh adds that buyers need to be careful not to overstretch: even though house prices have dipped in some segments, the higher interest rate makes the monthly mortgage payment just as challenging.
Robert Hogue and Rachel Battaglia, economists at Royal Bank of Canada, expect prices in Ontario to soften further through the remainder of this year and possibly into early next year as market conditions continue to tilt in favour of buyers.
Luke Dalinda, a real estate agent with Royal LePage Real Estate Services, says sales are generally slower throughout the Greater Toronto Area but certain niches are heating up.
The increase in listings can partly be attributed to empty nesters and others selling their large houses in established neighbourhoods in Oakville or in the upscale Kingsway enclave, for example, because they anticipate a greater swell in listings as borrowers have their mortgages come up for renewal in the coming years.
Mr. Dalinda points out that homeowners who purchased a property with a five-year term and a mortgage rate at historic lows in 2020 will likely have to renew the mortgage at much higher rates in 2025.
If the market is awash in inventory, homeowners figure, they are likely to fetch a higher sale price now.
“I think people are now starting to wake up to that reality and plan what they’re going to do,” he says.
Mr. Dalinda points out that the trend toward larger houses with home offices and backyard pools that fuelled the market in the early years of the pandemic impelled buyers to enter intense bidding wars.
“Especially in 2021, they paid a real premium,” he says.
Many long-time homeowners are reading economic forecasts, he says, and they figure they will fetch a higher price now than in a year or two.
The empty nesters are looking for condos with large floor plans, he says, which often means they are buying in older buildings.
In the Humber Bay Shores area where Mr. Dalinda does much of his business, there were recently 205 entry-level condo units listed for sale under the $1-million mark, he says. That compares with 149 in that segment in August.
Mr. Dalinda says the units in that price range tend to be 700 square feet or less with two bedrooms, though in some cases only one has a window.
Owners are often selling because carrying costs are high, he says, and they want to cash out before prices slide further.
While inventory in that tranche swells, the larger two bedrooms remain harder to find. Buyers with deep pockets are looking to older buildings to find larger floor plans.
Mr. Dalinda recently sold a unit with two bedrooms and a city view in 1,388 square feet for $1.25-million in Palace Place Court.
Unit 1510 was listed with an asking price of $1.299-million and sold for $1.25-million.
Suite 4608, the 2,437-square-foot penthouse in the same building, was listed with an asking price of $2.398-million and sold for the full amount.
By contrast, Mr. Dalinda sold a 505-square-foot unit a little farther west along the waterfront in the newer 60 Anne Craig Drive for $495,000 after listing it with an asking price of $499,000.
In many cases with the recently-completed towers, builders sold the units preconstruction for $1,300 per square foot or higher. Some of the developers have remaining inventory to sell, Mr. Dalinda says.
“Condo developers with leftover inventory are falling on their own sword.”
Mr. Dalinda says that listings in the fall market traditionally slow down in November but, 2023 could be the exception as he is still receiving calls from both house and condo owners who are asking for evaluations.