Fresh listings are rejuvenating the Toronto-area real estate market following Family Day, when a lull settled over the market during Ontario’s February long weekend.
Long weekends and school holidays always soothe the market, says Boris Kholodov, a real estate agent with Royal LePage Real Estate Services Ltd., Johnston and Daniel Division.
Immediately after the long weekend, Mr. Kholodov launched the listing for a five-bedroom house at 178 Balmoral Ave. with an asking price of $4.795-million.
“Now that buyers have returned from skiing and from the beach, they are ready to write cheques,” he says.
Whether buyers will display the same level of desperation as more listings arrive is hard to predict. The market in 2020 has so far seen scorching competition with dozens of offers on some properties and jaw-dropping premiums above the asking price.
Stephen Brown, senior Canada economist at Capital Economics says a reduction in the severity of the mortgage stress tests looks set to give the housing market a further lift.
Federal finance minister Bill Morneau recently announced that the government plans to adjust the qualifying rate when calculating stress tests for insured mortgages, which buyers need when they have a down payment of less than 20 per cent of the purchase price.
The change comes at a time when house price inflation is already accelerating, Mr. Brown points out, and a short-term decline in the qualifying rate could amount to a form of stimulus.
The Bank of Canada already faces a dilemma over the need to support activity against the requirement to limit the build-up of financial risks on the other hand, the economist says, and he expects the pressure to only intensify.
Tam Boyko, a real estate agent with Keller Williams Realty Solutions, listed a two-bedroom condo in the IT Lofts building in Toronto with an asking price of $1.399-million on a recent Thursday evening. By Friday at noon, the unit had sold for $1.5-million.
My Boyko says she considered the asking price fair market value for the unit with 1,259 square feet and therefore she didn’t hold back offers for a scheduled date and time.
The buyers moved quickly and made a strong offer on unit 406, so the sellers were happy to halt the sales process after less than 24 hours, she says, adding the boutique building at 130 Rusholme Rd. is popular because of its location in the residential Dufferin Grove neighbourhood. She’s heard from some other owners in the building, she says, so she’s hoping the sale will encourage new listings.
Matthew Regan, who oversees the Mississauga and Oakville offices of Royal LePage Real Estate Services Regan Real Estate, says the action in Toronto has spread to the 905 area surrounding the core.
“The ripple is going outward.”
He also sees prices rising at shockingly fast clip.
Mr. Regan says buyers need to “go the extra mile” in a market with so much competition.
At a townhouse in Oakville, an agent in the Regan office represented a buyer who had the second-highest bid but was still chosen by the sellers over competing bidders. The sellers, he says, felt more comfortable that his buyer would actually close.
In 2017, many deals fell apart during the market skid. Some buyers were fearful they overpaid and tried to walk away before closing deals. That led to lawsuits initiated by sellers who often had to accept a lower price from another buyer months later.
Mr. Regan says the frenzy feels similar to the early months of 2017 – when prices skyrocketed before the Ontario government introduced a foreign buyers tax and other policies that smothered the flames.
Mr. Regan is expecting the buyer enthusiasm to continue, but he throws an asterisk on that prediction.
The market could lose steam if a flood of listings arrives or if the Bank of Canada raises interest rates. And he sees danger ahead if buyers push prices too far too fast.
“I’d be nervous if prices really escalated.”
So far Mr. Regan hasn’t seen a substantial uptick in listings. He notes that many owners are unwilling to move because transaction costs are so high.
But as spring approaches, he is expecting a high-paced market.
Bidders increase their chances if they provide a certified cheque or bank draft with a hefty deposit. He advises house hunters not only to line up a pre-approved mortgage but to also ask the bank for a reference. A personal note still goes a long way.
“Get a letter from your bank saying what a fine, upstanding buyer you are. Say who you are and where you’re from and what your dog’s name is – it makes a huge difference.”
On the flip side, it’s absolutely essential for sellers at the higher end of the market to list with a realistic asking price, he says.
“If you overprice, that’s the kiss of death.”
Mr. Regan cites the example of a house in Mississauga that sat on the market for eight months with an asking price of $5.5-million.
His office acted for a buyer who purchased the property for $4.25-million. Mr. Regan says the buyer was able to negotiate a good deal because the seller made the mistake of overpricing the home to begin with.
Mr. Regan believes a better strategy would have been to list the house for $4.999-million. At that price the seller likely would have been able to sell quickly for $4.7-million or $4.8-million before the property became stale.
“They left a lot of money on the table. It cost them dearly in the end because it sat for months and months.”
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