No chill in real estate sales
Toronto real estate agents lament shortage of product
By Carolyn Leitch – Globe and Mail
With world stock markets roiling this week, many investors are looking at their homes as a safe haven in more ways than one.
“We’ve had a really quick start to January,” says one Toronto real estate agent.
This week, a Toronto real estate agent was representing a client in the escalating bidding war for a house listed for $399,000 just north of the Beaches neighbourhood. The sellers were inundated with 16 offers, including the winning bid of $481,600.
Despite losing out on the house, the client was satisfied with the outcome — he wouldn’t have paid any more.
According to the Toronto Real Estate Board, the number of houses changing hands in the first half of January jumped 11% from the same period of a year earlier. The average price increased 8% to $367,574 from $340,793 at mid-January last year.
More signs point to a robust condos-for-sale/propertysearch.htm” title=”toronto real estate” target=”_blank”>Toronto real estate market this spring: Bidding wars are common, buyers are outnumbering sellers, and this week the Bank of Canada lowered a key lending rate by one-quarter point.
Economists are predicting more cuts.
Some potential buyers are feeling more buoyant about the condos-for-sale/propertysearch.htm” title=”toronto real estate” target=”_blank”>Toronto real estate market the more they look at the carnage in financial markets.
“People are feeling that’s where they’d rather have their money.”
Some buyers may be rushing to close transactions before the city’s new land transfer tax comes into effect.
As of Feb. 1, Toronto home buyers will pay a new fee to the city in addition to the existing provincial land transfer tax.
It will nearly double the tax bill for home buyers, raising the tab on a $375,000 home to $7,575 from $4,100.
Toronto real estate agents are struggling with a dearth of houses on the market. There’s less to buy. It’s hard to take the temperature of the market when you haven’t got enough product.
One Toronto real estate agent says he knows of potential buyers out there who are anxious to see new houses arrive on the market. “I’ve seen this, year in and year out, for the past 30 years — people want to wait until the tulips come up,” he says of the sellers.
But he believes that when eager buyers abound, sellers should take advantage of the lack of competition. “Prudent vendors will forgo the tulips.”
The Toronto real estate market maintained a torrid pace in 2007 – and across Canada, resale house prices set a record last year with a 20% increase over 2006.
House prices, which rose 10.8% in 2007 from 2006, are expected to go up at a more modest rate in 2008, according to the Canadian Real Estate Association.
At Toronto-Dominion Bank, economist Beata Caranci says there is little concern that the Canadian housing market will start to mirror the slump in the United States. Still, she expects the central bank to cut rates by a more aggressive 50 basis points at its next scheduled meeting on March 4th and possibly another 25 basis points when it meets on April 22nd.
In an economic commentary, she predicts that national house prices will rise 5% to 7% in 2008, compared with a U.S. market that will likely absorb losses of 5% or more.
“Given the degree of economic uncertainty on both sides of the border, the extent of additional easing will be highly dependent on how developments in the U.S. unfold and whether financial market confidence remains in question,” she cautions.
Toronto Real Estate Board figures show that the average time on market so far in 2008 has fallen 13% from this time last year. The Toronto Real Estate Board estimates that the average time on market is 41 days, but hot neighbourhoods see houses disappear much more quickly.
In the Beaches neighbourhood, Toronto real estate agents would be shocked if a house ever lasted as long as 41 days. If a house is priced right we expect to see it move in the first couple of weeks. And while multiple offers are still common, some buyers are fed up.
Most in the real estate industry expect to see less dramatic price increases in Toronto this year. Nothing goes up … forever.
An exception could be the centre core of Toronto, he says, where buyers always seem to outnumber sellers. The people who can afford it continue to want to live there — that underpins value. Many don’t see the centre of our city doing anything but carrying on.
Lower interest rates help to keep houses affordable and therefore an easing of monetary policy bolsters demand.
The land transfer tax caused a flurry of buying in December but it could cause a chill at the lower-priced end of the market.
It’s too early to say whether it will be absorbed at that level or not.
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Contact the Jeffrey Team for more information – 416-388-1960