One of the big surprises of the resale market in 2016 in the Greater Toronto Area was the strength of the condo segment. The shortage of listings in the single-family home category persuaded many potential buyers to take another look at high-rise living.
The trend appears set to continue in 2017.
Last year, sales of condo units in the GTA jumped 20.3 per cent compared with 2015, according to the Toronto Real Estate Board. That compares with a 10.5-per-cent increase for detached houses last year compared with the previous year.
The average selling price of a condo unit in the GTA rose 9.7 per cent in the same period while the average price for a detached house swelled by 20.8 per cent.
Christopher Bibby of ReMax Hallmark Bibby Group Realty Ltd. says condo buyers used to be able to choose a desirable neighbourhood and then pick from a nice selection of units. These days, they have to be much more flexible, he says, because so many buyers are competing for units.
If buyers do find something they like, he advises them to put in an offer immediately.
“Should we sleep on it?” clients will ask.
“You should come to my office right now,” is his response.
Mr. Bibby was working with one couple who started out looking for a condo in a boutique building around the fashionable intersection of Bloor Street and Avenue Road. They had to expand their search farther north to Yonge Street and Eglinton Avenue in order to find something.
Mr. Bibby believes one factor is that annual price appreciation is so strong, owners will hold onto an existing property even when they are planning to move into another one. “Everyone’s reluctant to give property away. Units keep rising in value. It’s tax-free money so why are they going to sell.”
Most of the potential sellers he talks to now have a strong reason to list the property – no matter which type of real estate they own. An owner may be retiring or relocated to another city, for example. In other cases, people bought a unit from a developer three years ago and now that it’s finally ready they need to raise money by selling an existing unit.
“Everyone I’m working with now is selling because they have to,” Mr. Bibby says.
Owners of condo units are much more willing to rent them out instead of selling because the rental market is strong. Meanwhile, investors keep buying units in new developments. “All the preconstruction projects are selling out.”
Mr. Bibby says that many buyers in Toronto are comfortable now with buying from plans. They’ve become so familiar with the finishes and layouts that builders are presenting, they can look at a rendering and decide if they want to buy a unit. “Developers almost don’t need sales centres now,” he says.“I don’t think we will need that experience any more.”
Real estate agent Heather Holmes of ReMax Hallmark Realty Ltd. believes the federal government’s tighter regulations surrounding mortgage qualifications will continue to push some buyers towards the condo market in 2017.
In December, Ms. Holmes sold a unit at the Chocolate Company Lofts building on Queen Street West. It was the middle of the holiday season but that didn’t deter 13 bidders from getting their offers on the table on offer night. The unit was listed with an asking price of $749,900 and sold for $931,500.
The unit has a view over Trinity Bellwoods Park and lots of the “hard loft” character that many buyers covet, she says, but the action was more intense than she expected. Three agents called with bully offers, she says, despite the fact that she made clear in the listing that the seller had decided in advance not to review bids before the scheduled offer date.
Ms. Holmes had advised the owner that waiting for the stated deadline - in that case a Sunday morning - would allow a smooth process and the bullies would likely return. “If they really want the house, they’ll come on offer night.”
The owner decided to sell at the end of 2016, she says, because of the uncertainty facing the real estate market in 2017. Some financial institutions have raised mortgage rates and the seller thinks more hikes may be on the way. There has also been a dearth of listings throughout 2016 so the seller figured demand would be high. “People with a $1-million budget struggle to find something,” she says.
Ms. Holmes says she agrees that the feds’ more stringent “stress test” for buyers who need mortgage insurance is understandable, but she sees buyers first-time buyers who are being forced to switch strategies as a result.
One couple looking for a condo in downtown Toronto decided to search in Etobicoke instead. The couple was able to find a pleasant two-bedroom unit in the Mystic Pointe area, she says, but not without competition.
Ms. Holmes says first-time buyers in the Greater Toronto Area today struggle more than ever with the dilemma of deciding whether to save a larger down payment or whether to jump into the market. The average price for all housing types rose 17.3 per cent in 2016 compared with 2015. “You could wait another year and save some more money but where are the prices going to be?”
Nationally, the Canadian Real Estate Association is forecasting softer sales in 2017 in comparison with the benchmark set in 2016. CREA president Cliff Iverson says tighter rules surrounding insured mortgages introduced by the federal government in the fall will likely weigh on the market this year, though the markets in different cities have different economic conditions and other factors driving them.
This week, Canada Mortgage and Housing Corp. announced it will raise mortgage loan insurance premiums as of March 17, 2017.
James Laird, president of mortgage company CanWise Financial, predicts that the increase in premiums will not have a significant impact on the average buyer. Those without a large down payment will have to pay higher monthly premiums but they will be paid over the life of the mortgage, so the cash required on closing does not change.Report Typo/Error