Welcome to the latest installment of my Tales From The Real Estate Trenches, where I periodically offer anecdotal insights on the Toronto real estate market. As a realtor who operates in the original City of Toronto, I keep 'my finger on the pulse' in all four quadrants of the market - specifically on the dynamics for both Buyers and Sellers in the Condominium and Freehold housing segments.
By all accounts the Toronto real estate market is currently in flux, as a result of The Provincial Government's Ontario Fair Housing Plan, introduced on April 20th, 2017, effectively skewering the market. The policies - many which aren't directly trying to cool skyrocketing prices - are being questioned on their merit and whether they'll sufficiently cool the market for the long term. The Bank of Canada has since increased interest rates and the Federal Government is talking about introducing a mortgage stress test for all Buyers regardless of down payment. Both of these measures may be more effective than the April intervention. However, the immediate aftermath - and arrival of the summer which is slowest of the real estate seasons - has caused many Buyers to move to the sidelines as Sellers listed, relisted, and then relisted again in an attempt to generate a sale for sums similar to the spring peak. Those precedent setting values aren't being obtained with great frequency, unless the property is in a Triple AAA location with the same on-going out-of-kilter supply/demand issue, like when I recently sold This 1880s Bay & Gable Victorian In West Queen West In 48 Hours!, garnering a 75% increase in value in just five years!
In the interim, the news is all about how Toronto Home Buyers And Sellers Are Playing The Waiting Game.
Statistics have demonstrated that the condominium market has oscillated on its own accord - with values continuing to increase - in particular for the under $1mil price point explained in 17 Facts Showing How Toronto’s Condo Market Stood Tall In Q2 2017, though it doesn't mean the condominium market was immune to the government intervention. However, for condominiums selling under the $1mil mark it was radically different compared to the freehold market (where downtown properties under $1mil are scarce) which succumbed to a sluggish pace, with Toronto Home Sales Dropping 40% Compared To A Year Ago. By my assessment, the main factor is mostly one of affordability. Buyers with less than 20% down and are capped by high-ratio mortgage restrictions that limit their purchasing power to under $1million have continued to secure downtown condominiums without much concern for the new Government policy, while having a heightened awareness that mortgage interest rates are climbing, if only by a smidge. For those Buyers it's all about 'the reach' within the limitations of their budget.
Here's some real time examples on the Condominium Market dynamics:
It's not unusual for a Seller to list their property with a holdback on offers, and if the strategy doesn't work then the Seller may relist at a higher price and sees what transpires. That was exactly the case when a 2bed 2bath condominium with panoramic views came to market in a calibre building located near Jarvis and Wellesley. Listed for around $700,000 at the beginning of July, two offers competed unsuccessfully to secure the suite at a sum acceptable to the seller, so it was relisted a week later for near $830,000. My buyer, who had not competed for the suite originally, decided the space aligned with her desire, prompting her to submit a full price bid six days later. Unfortunately, another Buyer decided to compete, securing the condo for over $840,000. The last comparable sale five floors higher had sold 14 months earlier for around $730,000, which represents a 13% increase in value.
A few weeks ago a second 2bed 2bath condominium with similar panoramic city vistas came to to market for about $880,000, located near the St. Lawrence Market. Listed in June for nearly 3 weeks at the same price, that offering had been terminated when an unexpected flood shut down the elevators. Relisted again at the same price - now at the end of July - the property was on the market for over a week when my Buyer decided to submit an offer, only to discover another offer had just been registered. Reluctant to compete, my Buyer elected not to proceed and the property sold for its full list price. How did it compare to recent sales? The most comparable sale in this building was of a similar size three floors higher, selling last November for $820,000, which represents a near 7% increase in 9 months.
The take-away? It's taking longer for condominiums to sell that it did in the spring, but a well-priced listing that qualifies for high-ratio financing is still going to secure a Buyer. These condos - which I consider the best-of-the-best in the under $1M price segment - are seeing a ten percent increase over the past year.
Before I give the impression the condominium market was immune to government intervention, it has been. Here's an example. At the beginning of April, a swish 2bed 2.5bath corner condo on the 35th floor - near King and Spadina - listed for nearly $1mil spiked to a precedent setting $1,150,000. By all accounts it set the bar for this centre-of-the-action location. And yet, just 8 weeks later near identical unit two floors below was listed for the same list price and sat for 25 days, before being relisted for about $40,000 less for a further 23 days before selling for under $950,000. It aligns (sort of) with a sale 19 floors lower - and near identical outside of being on a lower floor (which does impact value when it's all about 'bright light city views') which sold for $900,000 - at the beginning of July. Regardless of the exact selling price, that's still around a $200,000 spread between two units two floors apart in a matter of 4 months. That represents nearly a 20% decline in value. It does attest to how the effort by the government to cool the market has worked in the short term, effectively removing the frothiness of a market which was out of control.
Here's some real time examples on the Freehold Housing Market dynamics:
This solid well-maintained 2.5storey 4bed 3bath semi near Donlands and Danforth came to market for just over $900,000 the second week of July. In a location where fixer-uppers of a similar size were garnering anywhere from $1.2mil to $1.4mil in March and April (granted, with on site parking), this family-friendly dwelling in a reputable school district still garnered multiple offers, but fell short of the sum the seasoned listing realtor predicted as fair. Despite a valiant effort by my own Buyers - who offered every cent they were pre-approved for - they lost the bidding war to a Buyer who ponied up a sum closer to $1.1mil-ish. In my books, the Buyer did very well securing this property, which was in good nick, just steps to the subway, and in proximity to some pretty amazing retail on The Danforth. For a Buyer purchasing for the long term (let's say a decade plus), this will be a win-win buy.
Who might have imagined that two side-by-side semi's in the east end would sell with such an astonishing gap in values just months apart? One side - which sold in 1990 for $221,000, sold again in 1998 for $216,100 (yup, that's a lower price 8 years later!), resold in 2005 for $365,000 and 12 years later in March 2017 (with only building component upgrades) garnered an astonishing $1,100,000 -ish. That's a 300%+ increase over 12 years!
Attached next door to this sale, the near identical dwelling - which had a non-retrofit lower level suite renting for $1000 per month (and would historically have driven the sale price up because that $1000 a month rent covers a $220,000 mortgage at 2.64% with a 25 year amortization) - came to market in July well-priced under $1mil. However, given the market reticence to act, it sat 31 days before savvy Buyers and their realtor negotiated the place for nearly 10% below the asking price. While I don't know the back story, my guess is this may have been one of those 'Motivated Sellers' caught having bought in the spring and then having to sell their property for a significantly discounted value. It's unfortunate, but there are Buyers circling like vultures looking for these kinds of opportunities. Do I fault them? I can't when this is how capitalism works.
The market is in certainly in flux. For the Buyer who has deep pockets (over 20%) and purchasing for the long term (let's say 7 years +), I'd have no hesitation recommending they lock down a dwelling for a sum less than what it would have garnered in April (these freehold houses sold for 10-15% less than what I believe they would have fetched in the spring), or even a spacious cityvista condo in a Triple AAA location (a 10% increase in value from a year prior is modest compared to the shocking gains we saw this past spring). But if I was a bit thin on down payment, in an occupation vulnerable to a change in the economy (like any of us in the housing industry - ranging from services, construction, or retail), or pushing my debt to a threshold where higher future interest rates could sink me, then I'd recommend proceeding with caution and prudence.
The dynamics of real estate in Toronto require constant vigilence. That said, here are some of my recent posts worth reading on the Toronto Real Estate Market:
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