Toronto real estate: Ottawa’s efforts to cool house prices have slowed condo mar­ket, but GTA house prices con­tinue to climb

Susan Pigg – Toronto Star

First-time home­buy­ers Jody and Michael Fegel­man have heard a lot of talk over the last year about Canada’s cool­ing hous­ing mar­ket. All the cou­ple have felt is the sting of its heat.

Dur­ing their 1–1/2-year search for a home for their two young chil­dren, the Fegel­mans have been on the los­ing end of three gru­el­ing bid­ding wars. They have paid for a home inspec­tion on a place some­one else got by pay­ing $80,000 over the ask­ing price.

They’ve felt heartache, dis­ap­point­ment and fear that their chil­dren Jack, 5, and Lilly, 2−1÷2, would be renters for life.

“My par­ents just kept say­ing, ‘Wait. Prices are going to come down,’ says Fegel­man. “But the truth is, there is a boom going on in Toronto. I don’t think things will change or bid­ding wars will stop.”

Com­ment: How many times have I heard that? Prices don’t go down, they really don’t. Maybe a few times in the 1990s after the silly bub­ble of the late 1980s, but that is. Prices for every­thing, in gen­eral, rise over time. It is just infla­tion. From cars to choco­late bars, the cost always increases. Think about what you paid for your first car, what did it cost to go to the moves 20 years ago? Over the longer term, house prices will never, ever, go down.

Over the last four years, Finance Min­is­ter Jim Fla­herty has tight­ened mort­gage lend­ing rules in a des­per­ate bid to bring rea­son to the red-hot hous­ing mar­ket, espe­cially in Toronto and Van­cou­ver where prices have hit the stratos­phere dur­ing the last decade, pro­pelled largely by low inter­est rates.

That, com­bined with surg­ing sup­ply of new condo projects, has def­i­nitely sent a chill through Toronto’s high­rise hous­ing sec­tor since last sum­mer, but demand for lowrise houses shows no signs of let­ting up.

Com­ment: Not so much. Prices for con­dos are now start­ing to rise again. Sup­ply dropped, sell­ers pulled their list­ings off the mar­ket, many rent­ing them out in the crazy rental mar­ket. There is no fire sale, no pan­icked sales. So, yeah, the chill is cer­tainly off the condo market.

Although home sales were down 11.5% and list­ings up slightly as of mid March over a year ear­lier, unre­lent­ing com­pe­ti­tion among buy­ers for too few prop­er­ties for sale — espe­cially in the City of Toronto — saw prices jump 6% across the GTA, accord­ing to the Toronto Real Estate Board.

Com­ment: That is an aver­age of 6% for houses AND condos.

Semi-detached homes sold for an aver­age $622,044 in the City of Toronto in mid-March, up a whop­ping 12.2% from a year ear­lier (they were up just 2.9% in the 905 regions to $398,328.)

Detached homes climbed by 7.2% to an aver­age $909,910 in Toronto, out­paced slightly in the 905 regions were a 7.7% climb saw aver­age prices hit $603,797.

Town­houses in the 416 region climbed by 8.2% in mid March year over year to $447,460, com­pared to an almost 7% increase in the 905 regions to an aver­age $375,420.

Even the cool­ing condo sec­tor, where resale condo sales were down almost 10% in mid-March year-over-year and list­ings have been climb­ing, saw price growth of 1.9% in the City of Toronto, com­pared to just 0.2% in the 905 regions.

“We’re see­ing a major cul­ture shift and a com­plete rede­f­i­n­i­tion of what’s desir­able and the (hous­ing) mar­ket is reflect­ing that now,” says vet­eran urban plan­ner Ken Greenberg.

“There is a new North Amer­i­can dream, and it’s no longer to have the sub­ur­ban house and the fleet of cars. It’s liv­ing where you can buy your gro­ceries on foot and you have access to transit.”

Com­ment: Which is a HUGE com­po­nent of the condo mar­ket. And yet the naysay­ers seem to ignore that fact. Cou­ple it with afford­abil­ity and investors, it is easy to see why the condo mar­ket in Toronto is so strong.

With the peak buy­ing and sell­ing period, spring mar­ket, just around the cor­ner, Canada Mort­gage and Hous­ing Cor­po­ra­tion is see­ing some inter­est­ing indi­ca­tors as well.

“We’re not see­ing as many first-time buy­ers get­ting into the mar­ket right now because of afford­abil­ity, but there is a con­sid­er­able pool of peo­ple who have bought over the past 10 years and have out­grown their con­do­mini­ums,” says Shaun Hilde­brand, CMHC’s Toronto mar­ket analyst.

“There is strong demand for move-up prop­er­ties fairly close to the core.”

The biggest supply-demand imbal­ance right now in the GTA is for semi-detached homes priced between $500,000 and $700,000 in areas like Ron­ces­valles and Leslieville, says Hildebrand.

Com­ment: Any­thing in that price range gen­er­ates cage matches – to the death!

Even some areas of Durham Region, close to Toronto’s bor­der, have seen a tight­en­ing of sup­ply because of first-time buy­ers look­ing for more afford­able hous­ing options, he added.

Com­ment: There are bid­ding wars galore on houses in West Pick­er­ing, near the Scar­bor­ough border.

At the same time, demand for down­town rentals unlike any­thing seen in the last 20 years has dri­ven rents to mortgage-like lev­els and is start­ing to tip the bal­ance in favour of own­ing, given slip­ping condo prices and low inter­est rates, says Hildebrand.

Com­ment: The rental vacancy rate is now under 1% in Toronto, demand is WAY above supply.

Despite what sounds like all good news for the hous­ing mar­ket, sell­ing real estate has never been harder, says vet­eran bro­ker Sally Cook. And it’s bring­ing out the worst in the indus­try: Under­pric­ing to drive up com­pe­ti­tion for what lit­tle is out there and hold­ing off accept­ing offers for days to cre­ate a frenzy of longing.

“It’s become emo­tion­ally, phys­i­cally and finan­cially drain­ing,” for would-be home buy­ers, as well as agents, says Cook. “I decided last year to con­cen­trate my efforts with first-time buy­ers look­ing for con­dos. There’s lots of inven­tory and I don’t have to fight over it.”

Com­ment: This is not new. Bid­ding wars really took off in the crazy mar­ket of 2007 – and have not stopped since. Peo­ple really should be used to it by now. You don’t have to like it, but you should not be surprised.

The frus­tra­tion of what turned out to be a 1–1/2-year search for a place to call home con­vinced the Fegel­mans they needed to try some­thing dif­fer­ent. On the sug­ges­tion of their agent, Ira Jelinek, they started min­ing MLS data ear­lier this month for houses that had been lan­guish­ing on the mar­ket for weeks.

They were the only bid­ders for a derelict semi-detached house in the Vaughan Rd. and St. Clair Ave. W. area that had listed since Octo­ber. Orig­i­nally priced at $599,000, they were the only bid­ders and got it for $460,000.

That’s because it needs over $100,000 in renovations.

Com­ment: And yet they could prob­a­bly have bought a nice house for $560,000 and saved the has­sle of ren­o­va­tions. But it is a smart move, stay out of the fights and avoid the HGTV houses. Find some­thing you can work with in an area you like and make it nice in time.

“It’s very hard to cool or con­trol a mar­ket when you have so many buy­ers chas­ing the same type of houses,” says Jelinek. “Agents who sell in my demo­graphic, to peo­ple in their late 20s and early 30s, are feel­ing the effects of this mar­ket, too.

“The good thing is, this will weed out a lot of the real­tors who’ll just say, ‘It’s too hard right now to be an agent.’ This is when the good ones will stick out.”

Com­ment: I don’t know about that…

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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fegel­man

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