Toronto: February, March, April.
There was little inventory, buyers frantic, agents creating bidding wars, prices escalating, tension, anxiety…instability and frenzy.
Welcome to now – a great time to take advantage of the market. There is more inventory, time for buyers to review potential homes and consider the whole picture, do their due diligence, negotiate from an informed, collected position, engage necessary conditionals, and invest in the future with greater confidence. This is not a crash of the market; consumers have to recognize stabilization when they see it and appreciate the sanity; I, as a realtor/broker certainly do.
Frenzy as reality – for me – meant a 6 am. check online for listings that had been made at 2 am. Pressure for buyers to have their certified draft ready within 24 hours, multiple and fevered viewings as if there would never be another house to buy, paperwork at the ready in case an offer was accepted against the competition. Life as a pinball! There was conflict of interest when I had to bow out of a relationship with a client since he and another client were bidding furiously for the same home!
February was unprecedented: little inventory, heightened anxiety. I listed a beautiful home, held offers, and accepted a bully offer (I had done a pre—listing home inspection). It sold in 3 days – $500,000 over asking and broke the ceiling home cost in the neighbourhood. This should make me (and the sellers) very happy. What bothered me greatly was the number of saddened, disappointed young families yearning for such a home, which was clearly and increasingly, so out of their reach.
Greed reigned in these spring months. A seller for a condo whose worth was realistically in the $850 per sq. ft. range, condescendingly dismissed me with ’’Come back when you have an offer of at least $1000 per sq. ft.’’ Sellers were of the mind that they were entitled and expected a windfall and piles of profit. It was a distorted, overblown, greedy reality to work in.
In March, I was working with a lovely couple who had me present an offer for a townhouse on Davenport. Offers were being held that Monday afternoon and were to be faxed and not in person. We were told that we were in the running with one other strong potential buyer. Our initial offer was $700,000 over asking. In order to maintain our hopeful lead, my clients raised their stakes to $925,000 over asking. Without another chance, we were told shortly thereafter, that we had lost in the bidding war to the seller agent’s own client (which rendered the deal profitably double-ended for that agent). My clients were devastated! And felt that there was some impropriety involved.
This type of alleged impropriety is a by-product of a frenzied marketplace – where panic can be contrived and manipulated. Wisely, in response to our own industry’s insistence, the Ontario government has directed an OREA Taskforce to look at these types of concerns. Its aim is to increase consumer confidence by setting policies that minimize conflict of interest (either real or perceived) involved in multiple representation situations, and to protect consumers by modernizing penalties for unethical behaviour.
Fast forward to now. The marketplace has stabilized. There is reasonable inventory. Agents are no longer holding offers. Listing prices are more reasonable. And buyers are breathing a sigh of relief. There is no frenzy, period.
What has evened out the market to its current sanity? There is more inventory. There is a perception that interest rates will likely increase. The government’s 15% non-resident tax* has taken the wind out of the glut of foreign investment. There are 14 or 15 other resolutions that are aimed at stabilization. There has been a 15 – 20% correction since the spring – but it is not spread uniformly across Toronto neighbourhoods. There is no such thing as an average. Neighbourhoods like Yorkville will maintain their niche as prime real estate because of their location, exclusive amenities, and world status. In Yorkville, there are homes for sale that have been on the market for 3 weeks: on Bedford, Bernard, Hazelton etc. They will certainly sell; Yorkville is a given, extremely valuable community and investment. Realistically, it will just take a little longer: Buyers will be sure, sellers will be sated in the new reality which bodes better for the future.
The take from this cautionary tale: frenzy feeds on itself and distorts reality. The future is here – just behind that silver lining – and I’m looking forward with earnest (pun intended) optimism.
* Ontario’s 15% Non-resident Speculation Tax applies to non-residents of Canada wishing to buy 1-6 units in Ontario’s Golden Horseshoe. It is in addition to any Land Transfer Tax payable. If you are a Canadian citizen, you are exempt from the tax, even if you live outside of Canada. If a foreign investor is a third partner, he will have to pay the tax on the entire purchase price.