Average home prices across the GTA declined 15.8 per cent from their April peak, but the slice of the market between $1.4-million and $2-million stayed fairly active – even as the overall market stalled.Fred Lum/The Globe and Mail
Some homeowners appear to be taking advantage of a dip in Toronto-area house prices to trade up to a more desirable address.
Hoggs Hollow, Lytton Park and Deer Park are some of the pockets seeing a spate of buying in the $4-million-and-up range. People realize their existing property has likely slipped in value, says Andre Kutyan, a real estate agent with Harvey Kalles Real Estate Ltd., but the high-end house may be on offer at a larger discount.
"It's narrowed the gap," Mr. Kutyan says. "If it's a little bit more palatable now, they're more willing to pull the trigger."
Across the Greater Toronto Area, the average home price has declined 15.8 per cent from the April peak to stand at $775,546 in September. The amount of fluctuation – from imperceptible to a wild swing – varies significantly depending on the neighbourhood, housing type and price range, however, with prices in the 416 generally holding up better than those in the 905 area code.
Mr. Kutyan says the slice of the market between $1.4-million and $2-million stayed fairly active – even as the overall market stalled after the Ontario government introduced new policies aimed at cooling run-away price growth. But carriage trade home were moving slowly until recently, he says, pointing to a recent deal for a Hoggs Hollow home for more than $9-million and another in the same area for $8.7-million.
Buyers have included doctors, Bay Street financiers, and a partner at a big accounting firm. One property with a price tag above $3-million was sold to a Macau-based buyer with kids attending university in Toronto, Mr. Kutyan says, adding that the buyer wasn't at all fazed by the 15-per-cent tax on purchases by non-resident investors that the province introduced in April.
Mr. Kutyan is surprised at the speed at which buyers are moving after months of languor in the upper echelons.
He listed a house for sale on Lonsdale Road in Deer Park with an asking price of $4.995-million and sold it three days later for $4.86-million.
In Ledbury Park, a house on Carmichael Avenue sold on the first day on market for $2.125-million – at a premium to the asking price of $2.098-million.
One of Mr. Kutyan's listings in Lytton Park sat on the market for nearly two months with an asking price of $4.295-million. Before that, it was on the market with another agent with an asking price of $4.59-million. It recently had a spike in showings and the seller accepted an offer of $4.128-million. "All of a sudden we saw a lot of activity and it sold."
In areas such as Willowdale, or Bayview and York Mills, there's a glut of inventory and houses are still taking longer to sell, he says. The properties changing hands quickly tend to be between two and 10 years old, in established areas with good private schools, in his opinion.
Well-heeled buyers are also more likely to be immune to the expanded "stress test" that will come into effect on Jan. 1st. After that date, people who seek a mortgage from many lenders will have to show that they can afford to pay a higher rate of interest than they sign up for. The more stringent rules were unveiled last week by the Office of the Superintendent of Financial Institutions, which regulates the banking industry.
"Loan-to-value ratios are quite strong," Mr. Kutyan says of well-off purchasers, who are usually trading up from an existing home.
He is hearing lots of questions about the stress test from buyers in other tiers, he says. He expects many of them to pull purchases forward. "All kinds of people are asking about it."
Still, even with some pockets seeing renewed strength, sales for October are likely to be lower than they were at this time last year when the Toronto Real Estate Board reports the latest numbers early in November.
John Pasalis, president of Realosophy Realty Inc., estimates that sales in the Greater Toronto Area dropped 32 per cent during the first two weeks of October compared with October of 2016. Sales of freehold properties fell 32 per cent and condos 30 per cent, according to Mr. Pasalis' research. New listings, meanwhile, were at a similar level to the same month last year.
"Any time anyone lists something too high, they're not getting offers on offer night or they're sitting on the market," Mr. Kutyan says.
Canada's economy is simmering down notably after the miraculous rebound in the previous four quarters, points out Douglas Porter, chief economist at Bank of Montreal.
Mr. Porter counts the housing market as one of the big risks to the country's economy. The other is the protectionist leanings of the U.S. administration of Donald Trump and the dark outlook for the North American free-trade agreement.
With the interest rate hikes so far and economic growth slowing, he sees clouds forming.
Also, now that the Office of the Superintendent of Financial Institutions has tightened the rules surrounding mortgages for uninsured borrowers, the Canadian real estate market faces more uncertainty, Mr. Porter adds.
"Housing looks poised to cool further next year after a blistering first half in 2017," he says. "If it's a little bit more palatable now, they're more willing to pull the trigger."
Carolyn Ireland