Capricious buyers are throwing the Toronto-area real estate market off kilter in April.
Patrick Rocca, broker with Bosley Real Estate Ltd., describes the market as “spotty” in midtown Toronto.
“Stuff is moving, but there are some quirks,” he says.
At 492 Sutherland Dr., in Leaside, a semi-detached house set a new milestone with a sale price of $1.925-million and five bidders in competition. The house was listed with an asking price of $1.499-million.
A week earlier, Mr. Rocca sold a two-bedroom semi-detached house in the popular Leaside neighbourhood with six offers. The property, listed with an asking price of $1.099-million, sold for $1.425-million.
That was the outcome Mr. Rocca was anticipating when he set a low asking price and an offer date one week later.
But a few days earlier, Mr. Rocca was taken aback when a house with an asking price of $1.699-million attracted only one bidder. Despite the lack of competition, the property sold above asking.
“Only one offer kind of threw me,” he says.
Around the same time, a condo unit had some attention and one agent signaled that a client was preparing to make an offer, but the buyers backed away.
“I was told I would have a bully and the bully never came.”
Mr. Rocca says one reason for the uncertainty may be that a bump in listings is taking the pressure off buyers to make quick decisions.
According to data from the Toronto Regional Real Estate Board, new listings in the Greater Toronto Area (GTA) swelled 42 per cent in March compared with February.
The average price in the GTA slipped 2.6 per cent in March from February, bucking the seasonal trend.
Mr. Rocca has heard from a few buyers that they plan to wait on the sidelines for a drop in prices. But he notes that it’s hard to time the market with so many unknown factors ahead.
The 2022 federal budget unveiled last week won’t sway the market, in his opinion.
A move by the Trudeau government to ban foreign buyers for two years will have a negligible effect because many groups are exempted, including students, permanent residents and people who say they will make the property their primary residence.
When Ontario’s provincial government imposed a foreign buyers’ tax in 2017, there was a short pause in the market in the GTA, but overseas investors soon found a way around the rules, Mr. Rocca says.
“Foreign buyers are not stupid. They can find other avenues.”
Stephen Brown, senior Canada economist at Capital Economics, notes that measures targeting foreign buyers have little track record of success – largely because their role in driving up prices is overstated, he says.
The 15-per-cent tax Ontario brought in in 2017 has not prevented house prices from rising by more than 35 per cent since then, while house prices in New Zealand have surged by 60 per cent since the government there imposed a blanket ban on foreign buyers in 2018.
Mr. Brown predicts that house price inflation is likely to slow sharply in the coming year, but that will be due to tighter monetary policy rather than any other factor.
On the matter of interest rates, Mr. Rocca says he hears some rumbles from buyers but most clients are more focused on finding the right property.
“People need houses – they are still out there looking.”
Toronto-Dominion Bank senior economist Leslie Preston says the Bank of Canada is justified in moving aggressively to raise interest rates, given the country’s hot economy.
Ms. Preston points out that Canada’s unemployment rate fell to 5.3 per cent in March – the lowest level since comparable data became available in 1976.
While wage growth has picked up, it is not keeping pace with inflation, which was 5.7 per cent year-over-year in February, says the economist.
Pritesh Parekh, real estate agent with Century 21 Legacy in Toronto, says the change in tempo from frantic buying in January and February to a more sedate pace in March and April can be unsettling to sellers and buyers.
“It’s kind of a weird period right now. Everyone’s confused about what’s going to happen next.”
In March, sales tumbled 30 per cent in the GTA from March, 2021, according to TRREB. New listings dropped 11.9 per cent in the same period.
The average price stood at $1,299,894, marking a gain of 18.5 per cent from the same month last year.
“In January and February, sellers had completely unrealistic price expectations – and guess what – they beat them,” Mr. Parekh says.
But the winds shifted in March: the steepest drop was the 38-per-cent plunge in sales of detached houses in the 905 area code.
Throughout Toronto, Mr. Parekh noticed hundreds of price changes on listings in March, which indicates that properties failed to sell at the original asking price. In many cases, that means a house was listed with a low asking price and a date set for reviewing offers. If it doesn’t sell on the offer date, agents will often relist at a higher price and welcome offers any time.
That kind of change in tactics can confuse buyers, he adds.
“Everybody’s trying to feel out the situation.”
Now the spectre of rising interest rates is spooking buyers, and the slight dip in the average price in March has some wondering if prices have farther to fall.
“Psychologically, it has weighed on people quite a bit.”
Mr. Parekh sees the demand for condos picking up as buyers look for affordable options in the core instead of moving to the suburbs as they did at the start of the pandemic.
Mr. Parekh recently worked with an investor who purchased a condo unit in Kingston to rent to students, despite not yet owning a condo in Toronto, where he lives.
Mr. Parekh says the investor doesn’t feel ready to settle in one spot yet, but he figures prices may be higher by the time he’s ready to buy. Meanwhile, Kingston is less expensive than Toronto.
“In the past, people would save for their dream home. Now they’re buying a stepping stone.”
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