Carolyn Ireland – The Globe and Mail
As fast-paced as Toronto’s real estate market has been for years, it always seems to find a new gear.
Even buyers in the echelons well above the average price of $1,040,018 – the new milestone achieved in February – feel pressured to move with blistering speed.
Our recent “Home of the Week” at 128 Sherwood Avenue was listed with an asking price of $1.795-million and sold to a “bully” the first day it came to the market.
The bully turned out to be Toronto-based restaurateur Sebastien Centner.
“I only had a chance to see it for half an hour before we had to make a decision,” says Mr. Centner of making the leap with his wife, Sheila Centner.
The Toronto Real Estate Board’s latest data show how sizzling the market has been: For the Greater Toronto Area, sales jumped 11.3% in February from a year earlier.
Last week, it was headline news when the same report showed the average price of a detached house in Toronto had broken through the $1-million mark.
Comment: And now at $1.099m for the first half of March.
Bank of Montreal chief economist Douglas Porter believes the Bank of Canada’s surprise interest rate cut in January may be fuelling some of the current enthusiasm among prospective buyers in Toronto and Vancouver.
Comment: Nah, rates were low and the market was hot before that.
Headlines about price gains in those those cities also keeps their markets tilted in favour of sellers, Mr. Porter said following a speech at a Queen’s University real estate investment seminar in Toronto. “Strength often begets strength. There is a sense among some buyers that they have to get in before things rise even further.”
Comment: They do. It isn’t just a feeling. If they don’t buy now, prices and/or mortgage rates will be higher in the future. Or both. Think about it this way: if a house is $1-million today, with rates of 2.79%, then a mortgage payment with 10% down would be $4,262.73. Now, if prices rise 8.6% in the next 12 months and mortgage rates rise 1%, then the monthly payment rises to $5,151.40. That is an increase of almost 21% per month, almost $900 more… over $10,000 per year just in mortgage costs. Then there is the added $8,600 in down payment cash required. Income requirements rise from $165,000 for the current mortgage to around $179,000 in 12 months. And you wonder where the pressure comes from for people to buy RIGHT NOW.
Mr. Porter told seminar participants he is not worried about overvaluation in the broad Canadian housing market. Still, the central bank’s move did make him worry that such low rates could lead to overheating in markets that have already had a long run.
Comment: Note that he said he is “not worried about overvaluation”.
“I did think there is the risk it could get overdone. I’ve been covering the Toronto housing market for 30 years and the last time it came even close to this feel is the late 1980s.”
Mr. Porter observes that the recent shift in Calgary’s real estate market could actually help to buoy housing in Vancouver and Toronto because fewer people are likely to leave those cities for the oil patch. As energy prices have tumbled, home sales in Calgary have seen double digit drops while listings have surged. Mr. Porter warns that that dynamic inevitably will lead to a drop in prices if it continues.
Comment: And people could move from Calgary to Ontario. Happened 6-8 years ago when their market bubbled the last time.
He doesn’t expect Calgary’s problems to spread to Vancouver or Toronto. Vancouver’s market has lots of support from overseas investors, he says. Toronto’s market will likely benefit from an improving economic outlook in Ontario, which he ties to the strength of the recovery in the U.S. economy and the lower Canadian dollar.
Comment: Seeing as we don’t have an oil-based economy, how could it spread here?
Still, he says, a severe downturn in Calgary’s real estate market could undermine the confidence of buyers in other cities. “It might make them think twice.”
Comment: I doubt it. The average home buyer in Toronto, or Montreal, they aren’t thinking about Calgary. Vancouver, maybe.
Over all, Mr. Porter has a cautious view of the Canadian economy, which has been roiled by the decline in commodity prices. The fall of the Canadian dollar against the U.S. currency and signals from the long-term bond market also point to caution, he adds. “We can almost feel the landscape shifting below our feet.”
Comment: But the lower dollar helps Canada. Tourism increases, manufacturers benefit, exporters sell more. It helps the US economy, in an indirect way, which then helps Canada even more indirectly. Some banks estimate that a 10% drop in the CAD could translate into a 1.5% GDP increase. And, if it does lower the longer-term markets, that brings interest rates down, which further decreases mortgage rates. The betting line is still 50-50 on whether or not Poloz will drop the overnight rate further, to 0.5%.
On a more positive note, the U.S. consumer seems to be putting some steam back into that country’s economy. “At long last the U.S. economy is finally finding its stride. That is unambiguously good news for Canada.”
As for Mr. Centner in Toronto, he had never actually heard the term “bully offer” before, but agent Ronit Barzilay of Harvey Kalles Real Estate Ltd. advised the couple not to wait a week for the night scheduled for reviewing offers by listing agent Cailey Heaps Estrin of Royal LePage Real Estate Services Ltd.
The Centners didn’t know it but within hours the first bully offer had already been made at the full asking price. Owners Gina and Peter Schafrick turned it down. Typically, a “pre-emptive offer,” as real estate agents sometimes call them, comes with a large premium above the asking price so that sellers won’t be tempted to hold out for the offer night.
The Centners offered $1.9-million, or $105,000 above the asking price. The Schafricks quickly accepted.
Mr. Centner acknowledges that the deal didn’t come together without some angst. He and his wife never fight, he says, but that night over dinner she had to persuade him to push ahead. “We had a huge fight,” he says with a laugh. “I couldn’t wrap my head around it.”
The couple had been only loosely contemplating the idea of moving closer to Bay and Bloor from the North York home where they had lived for nearly two decades.
As the president and chief executive officer of catering company Eatertainment, he heads most days to the Manulife Centre to oversee the company’s two establishments, the Bloor Street Diner and The One Eighty (formerly known as the Panorama).
But once Ms. Centner saw 128 Sherwood land on the market, she immediately called her husband.
The circa-1980 house near Mount Pleasant and Eglinton was designed by Ms. Schafrick, an architect, for her own family.
The Centners loved the open plan, Bulthaup kitchen and modern design. “All of the lines in the house were so clean,” Mr. Centner says. “It just screamed attention to detail.”
He felt even more certain when he turned over a dining room chair and saw that it was a genuine Eames and not a knock-off of the style designed by Charles and Ray Eames. “That told us that they did not cut corners,” he says.
He says he has developed a real appreciation over the years for how precise the design of a modern house must be because flaws can’t be hidden behind elements, such as baseboards and mouldings. “Everything has to be perfect.”
The couple was confident they could afford to spend $1.9-million for a house and this one was move-in ready. From their research, they had figured they would need between $2.5-million and $3-million for a Toronto house with top-quality finishes.
The kitchen was particularly appealing to Mr. Centner, who says the two are “serial partiers” who constantly entertain.
Still, Mr. Centner says he had a sleepless night after the agreement was signed not least because the next morning the couple had to think about selling their own house. Fortunately, he says, their home near Yonge and Sheppard didn’t need a lot of staging or preparation.
Eighteen years earlier, the Centners had purchased the small house at 98 Franklin Avenue in the popular Lansing-Westgate neighbourhood.
Thirteen years ago, they had architect Lorne Rose design a large, modern addition at the rear while maintaining the appearance at the front. “When we renovated we basically blew off the back.”
A few years after that, an in-ground swimming pool and entertaining area were added in the backyard.
As soon as the deal for Sherwood was struck, they speedily listed the house with an asking price of $1.699-million and set an offer date a week later. They received a bid a few days in, but declined and invited the bully to return on offer night.
The bully didn’t show up but they did get two other offers. They had a bit of back-and-forth with one purchaser and signed the deal for $1.899-million, or $200,000 over asking.
“It was unexpected,” says Ms. Barzilay, who adds that everyone was elated when the negotiations were over. “We celebrated with champagne with the new buyers.”
Contact Laurin Jeffrey for more information – 416-388-1960
Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.