The Toronto-area real estate market remains in the doldrums this summer as buyers chase more petty distractions and sellers sit and wait. But sometimes, there are bursts of frantic activity.
Sydney Taylor, a real estate agent with McCann Realty Group, works with a couple who began searching for a semi-detached home in February when the market was on fire.
With the Bank of Canada raising its key lending rate four times between March and July, their purchasing power waned.
“The increase in the mortgage rate has reduced their budget,” says Ms. Taylor.
The couple diverted their search to apartments instead, and recently ended up competing with five competing bidders for a penthouse on Queen Street West.
The two-bedroom unit is listed in the Chocolate Company Lofts across from Trinity Bellwoods Park with welcome offers anytime.
The penthouse hit the market on Friday but Ms Taylor’s clients weren’t available to see her until Sunday. The couple loved the layout and the large balcony, and Ms Taylor thought the unit price was very reasonable. They hurried to make an offer that evening with a deadline set the same night for the sellers to accept it. Within that short period, another attempt landed.
The next day, customers made a new offer, but with the competition on the table, Mrs. Taylor knew they would have to prolong the irreversible period. During that time, the agent was able to muster up four additional shows for a total of six.
Ms. Taylor’s clients offered a slightly lower asking price around the $1,050,000 mark, but they were outbid. The unit sold for $1,180,000.
“We weren’t even in the running,” she says.
Ms Taylor says selling is a useful metric for the current market: desirable properties are selling but buyers are reluctant to enter competition.
“Maybe they were just waiting to see how it turned out,” she says of the bidders waiting in the wings.
Real estate buyers grapple with heavy demands
Some buyers wait until after the bid date, believing that they will have more bargaining leverage if the property fails to sell by the deadline.
Ms Taylor says some apartments have long stretches, but that large units in good locations often still move very quickly.
Another group looking for apartments is a homeowner with an empty nest and a large house for sale.
Ms. Taylor works with a couple in this segment who have missed getting a large unit near Bayview and Shepherd Streets.
She says this property, listed just above $800,000, attracted two bids and sold at full asking price.
Meanwhile, Taylor was keeping an eye on a three-bedroom house in Lisleville that was on the market after it was listed at an asking price of $1.567 million. Ms. Taylor took clients who missed out on Queen Street to see the property after the price was lowered twice and amounted to $1,199 million.
The house ended up selling for $1.1 million.
“I think the dealer mispriced it right from the start,” she says.
Ksenia Bushmeneva, an economist at Toronto Dominion Bank, says the property market across the country has continued to cool and the Bank of Canada’s massive 1 per cent rate hike in July will add to its weight. She expects the central bank to continue raising interest rates for the rest of this year – although perhaps not so fast.
As a result, you expect further declines in home sales and prices.
In this environment, Christian Vermast and Paul Maranger of Sotheby’s International Realty Canada say sellers should aim for a property in the top 10 percent of its category in order to catch the eye of buyers.
In other words, the house or apartment should be priced according to the current market conditions and also have attributes such as good location, quality finishes and polished presentation.
“It’s the mid-level that will weaken,” says Mr. Maranger.
In February, the market in the Greater Toronto Area had less than one month in stock (a measure of how long it would take to sell all active listings at the current pace of sales). At the end of July, that number was 2.5 months.
“It is the sudden nature that has shocked people,” Mr. Maranger says of the sudden slowdown.
Mr Maranger notes that sales in the GTA were very slow in July in all price segments – down nearly 50 percent from the same month last year – and he expects August to remain sluggish.
“Buyers aren’t capping opportunistic buying just yet,” says Mr. Vermast.
However, 23 properties traded for more than $3 million and, on average, sold for 96 percent of the asking price.
“There’s definitely no panic yet,” he says of sellers.
Agents advise clients to sell an existing property before purchasing a new property.
“You really have to sell first unless you have enough money and prepared to hold two properties,” says Mr. Vermast.
Agents receive a lot of calls for evaluation and anticipate a crowded decline in listings. Some sellers may move because of a new job or circumstances, they say, and others will need to sign up because of financial pressures.
Agents say that sellers in difficulty will be more motivated to sell and therefore will set realistic prices.
“These are the properties that will be put up first because they are going to be priced very sharply,” he says. “The overpriced and average people will sit and sit and sit and they will artificially inflate the inventory.”
Mr. Maranger says the conversation now with the homeowners is “How excited are you? How patient are you, how much time do you have?”
Meanwhile, the rental market is absurdly strong, they say, and many sellers may decide to acquire tenants instead.
Agents remember the downturn in 2008 when homeowners listed their homes with a sign that said “for sale or rent.”
“We’ll start seeing that again.”
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