Surge of Active Buyers, Supply Shortage Making Toronto a Frothy Market
Normally the real estate industry becomes really quiet in July and August, but this year in and around the GTA proved there are lots of buyers hungry to purchase a home, and at the same time there was a supply shortage. It even brings back memories of the extremely strong 2016 and 2017 market, as you will see.
Time will tell, but there is no question the GTA real estate market is very healthy. This Bloomberg article tells us August sales were up 13% over last year, while active listings fell 11% over the same time period. Also, home resale prices increased by five percent in August alone!Toronto/GTA August home sales rose 13% over 2018, with 11% fewer active listings. Upward pressure on prices meant a 5% increase on resale value in August alone! #TorontoRealEstate Click To Tweet
Stories from 2 buyers in the healthy Toronto Real Estate Market
Here I will tell you the story of two buyer’s recent experiences. One is in the market for a downtown Toronto one-bedroom condo, and the other is looking to buy a house outside the core. His search has taken him first to the east end and more recently to the west end of Toronto.
The Toronto Condo Market
The condo market continues to defy gravity yet again. It is certainly helped by the fact condo rents are incredibly high. This means condo owners are reluctant to sell, creating a supply shortage. In addition, buyers are willing to pay higher prices because the alternative of really high rents just to pay someone else’s mortgage is not that appealing.The Toronto condo market continues to defy gravity. High condo rents make owners reluctant to sell + create supply shortage. And, buyers are paying higher prices to own, because high rent to pay someone else's mortgage sucks.… Click To Tweet
As a matter of fact, we have helped several condo owners recently who want to move into a house. Often the patter of little feet is the impetus, as space is a really precious commodity when there are three or four of you.
These condo owners are refinancing their Toronto condo, taking out some equity they’ve made in the past two or three years, and using that equity as a down payment on a house in the suburbs. They then turn around and rent out the condo at a rate sufficient to cover their mortgage, taxes and maintenance fees.
A recent client of Ross Taylor & Associates struggled for years supporting herself and three kids AND her mom, all living in a one-bedroom condo on Gerrard Street. They somehow make the living arrangements work. And she came THIS CLOSE to selling her condo in 2013 for around $280,000. She hung in there and now it’s worth over $600,000 and now it’s time to buy a town house!
A Condo Buyer’s Story
Arun Kumar, from Right at Home Realty, knows the Toronto condo market very well. One of his buyers is looking for a one bedroom condo in trendy King Street West, just north of Stackt Market.
Arun said the overall volume of homes and condos listed is much lower than previous years. He said there is a sudden influx of buyers, and supply is tight in some parts of the market, especially condo apartments with close proximity to subway stops, and destination neighbourhoods that are very walkable like King West, Leslieville, Yorkville.Listings of homes and condos in Toronto is much lower. Supply is very tight, especially in destination neighborhoods that are walkable, like King West, Leslieville and Yorkville. #TorontoRealEstate #ArunKumar Click To Tweet
“Given these conditions, every well staged and well-marketed listing attracts a lot of interest, like this 645 sq.ft, 1 bed + den condo unit at 775 King Street West built in 2013 by reputable developer Minto. The asking price was set at $ 579,000, the unit was listed on Tuesday, and offers were to be reviewed on the following Tuesday.
I set my client’s expectations before even booking a showing, letting her know the unit has to be worth at least $625,000, if not more. After having lost out on two previous bidding wars, she was fearful of missing out on another opportunity and took time away from work to immediately see the property.
It was love at first sight, and she was the first potential buyer to see the property. The unit came with a locker and parking, the floor plan was efficient with no wasted space and though it faced a courtyard, it was bright and sunny and really checked off most factors in my client’s wish list.
After we saw the property, I reflected if we run into multiple offers, we might see the price get close to $645,000 which would be $1,000 per square foot! This is only because other buyers are comparing the resale prices to developers’ current prices in projects like Kingly.
My client was willing to pay over the market value, as she felt the prices were a moving target, increasing by the day. She got the condo’s status certificate reviewed by her lawyer so that she could waive the condition on offer date. She also obtained a draft for $50,000 which would be over 7% of the purchase price as the deposit. If you want to have a chance in these competitive situations, you better bring a gun to a knife fight!
Given the dearth of listings in the immediate vicinity, this unit attracted a record number of showings and eventually 27 offers on the offer date!!
We were among the last buyers to submit our offer and my client offered $677,000 as her highest and best offer. We also included her personal story and a picture to appeal to the seller’s emotions hoping to gain some empathy points.
After two anxious hours of waiting, the listing agent contacted me, sounding audibly exhausted after reviewing 26 offers in a row. He gave us the good news that my client’s offer was among the top 3 offers, and that we were being given the opportunity to “improve” our offer along with two minor changes in the paperwork that would be better suited to the seller.
We had less than 30 minutes to send in the improved offer. These are not fun situations, but she didn’t wilt and she upped her final offer to $682,700. After another hour of anxious hand wringing, we got the bad news the sellers had settled for another offer over ours. Next day we learned it had sold for $686,250.Small, well-staged 1 bedroom condo in great neighborhood attracted offers up to 18% above asking price, and sold for 682,700, topping $1000/sqft. #TorontoRealEstate #biddingwars Click To Tweet
My client just said “Thanks for the hard work, we both need a drink …” hiding the gush of emotions from missing out on her third condo, especially one she could really see herself being happy living in.
Toronto Starter Homes
Michael Petrant, also from Right at Home Realty, knows Toronto really well. His buyer is looking to exit condo life for a home he could live in on the main level, and rent out the basement to help defray the cost of ownership. Basement rents seem to go for $1,200 to $1,400 per month. They began their search in the east end of Toronto, in the Upper Beaches and north of the Danforth. They set out with a buying budget of $800,000, with the potential to go higher if the right property came along.
Mike showed his buyer small bungalows on Cedarcrest Boulevard and Sammon Avenue. The former was listed for $749,000 and sold for $780,000, but Jorge felt it was too small to be comfortable.
Mike also presented an interesting 3- bedroom home on Victoria Park listed at $1.025 million. Although the house showed well and had a stellar basement apartment, the inspection report indicated some concerns, and Jorge could envision dropping significant dollars on bringing it up to snuff. Someone else had no qualms however, and the house sold pretty quickly for $1,018,000.
They realized there was not much inventory in the east end, so decided to venture into the west end of Toronto, around the Junction area. In July, a lovely semi-detached home at 31 Fisken Avenue had sold quickly for $1,025,000 off an asking price of $998,000. Clearly you get less for your money on this side of Toronto.
Looking back, it seems July was just warming up. In August, the sun was shining very brightly!
In mid-August, they came across a really nice townhouse at 61 Osler Street. Offered for sale at $879,000, Mike and Jorge decided to make a move on this one. However, the buying process got out of hand and nine offers (!) were submitted. The final sales price was over a million dollars at $1,023,850. A great result for the sellers, and only time will tell if the buyers overpaid.
Meanwhile 747 St. Clarens Avenue, a small detached home, listed for $899,000 and sold in five days for $1,060,000.
Next up was a lovely detached home at 128 Emerson Avenue. Listed for $999,900, it sold 7 days later for $1,241,800.Looking back, it appears that Toronto real estate was just warming up in July. In August, the sun was shining brightly. #TorontoRealEstate Click To Tweet
Jorge felt the combination of lack of inventory as well as pent up demand were making the process unpalatable. He has decided to take a breather for a few weeks.
Mike told Jorge that there should be more houses on the market in the Fall, and hopefully a more balanced buy/sell environment will prevail.
Because it’s not fun when you are in a heated competition for a home. You can get caught up in the emotion of the moment and overpay, or you can feel the wind blast out of your sails every time you make a rejected offer.
“Our housing supply has not kept up with population growth, which has led to pent-up housing demand,” John DiMichele, chief executive officer of the Toronto Real Estate Housing Board, said in a recent statement.Our housing supply has not kept up with population growth, which has led to pent-up housing demand, says John DiMichele, CEO of TREB. #TorontoRealEstate #TREB Click To Tweet