“Sizzling” might be overstating the warming property market. But the real estate industry is finally predicting a return to a traditionally brisk spring — the kind of season that was virtually lost last year when, after months of bully bids and frenzied buying, sales soared in March and then stopped almost overnight.
Oakville broker Tracy Nursall says it’s been longer than a single aberrant year since the Toronto Region experienced a typical spring market. This year is more similar to 2013 or 2014 than any season since, she said. There was a long run-up to last March’s historical peak of a 34 per cent year-over-year price increase. The exceptional activity dates back to 2015, she said.
“Everybody’s taking 2017 out of the numbers, they should take 2016 out of the picture as well,” said Nursall of Sage Real Estate, who says the market west of the City of Toronto is still coming out of hibernation. But she expects sales to heat up with the later spring weather.
Downtown agents tell a different story. They say that the right properties in desirable neighbourhoods are attracting multiple offers, while still allowing room for negotiation.
Even in Durham Region — traditionally an island of affordability in the Toronto area — prices are rising and properties are moving faster than they were at the beginning of the year, said Dennis Roberts, president of the Durham Region Association of Realtors.
Even if the volume of transactions remains relatively low in the Toronto area, demand is building, said Soper.
Young people who haven’t been able to move out of their parents’ house are reaching the stage of life where they are going to buy houses and Canadians from outside Ontario are still flocking to the Toronto area’s job opportunities, he said.
“There were 25,000 new Ontarians, and most of them in the Greater Toronto Area last year based on people moving from other parts of the country. That is sharply up from what it was two years ago,” said Soper.
But macroeconomic factors will weigh heavily on the Canadian housing industry, he warns.
“What looks to be a very bright future could dim rapidly if a few things go wrong in trade, in mega-projects, even a sharp turn to protectionism or anti-immigration sentiment in Canada at the provincial level,” said Soper.
John Pasalis, president of Toronto real estate brokerage Realosophy, says he’s not expecting “crazy gains” this spring. But if prices stay where they are, by July or August, prices could hold steady or even rise slightly year over year by the end of 2018.
“The market’s going to do a little bit better than most people are expecting,” said Pasalis.
There is still only about two months’ housing inventory in the region, he said. That level would be rising to four or five months if sales and prices were going to slow further. That’s what happened last spring.
“While it’s slow in Richmond Hill, that means it’s really competitive in other parts. As a whole it’s pretty balanced right now,” said Pasalis.
Even the 905 communities that were hardest hit when the market deflated last April and May, are starting to improve, he said.
“Downtown is still insane. There’s no slowdown,” said Pasalis and that extends to central neighbourhoods such as Leslieville, Wallace Emerson and Dufferin Grove where buyers are competing for property.
Pasalis’s comments come a week after the Toronto Real Estate Board (TREB) reported a 14 per cent year-over-year drop in the average home price in March and a 40 per cent plunge in home sales. But month-to-month figures showed some warming, with last month’s prices 2 per cent higher than February’s and the third month-to-month rise.
“First-time home buyers — with the new rules — are really challenged to get into the market,” said Chris Alexander, regional director at Re/Max Integra.
Re/Max 2018 Spring Market Trends report predicts prices will fall around the GTA in comparison to last year. It predicts year-over-year declines between April and June from -2.5 per cent in Mississauga; -4 per cent in Brampton and -5 per cent in Toronto, to -15 per cent in Durham Region and -10 per cent in Oakville.
But the 2017 comparator is especially suspect given the unique circumstances of last spring and Alexander is predicting that by year’s end, average home prices for 2018 will end up around where they began this year.
“(Buyers) will show up for the good properties,” he said.
“Sellers are going to have to come down to reality and understand this isn’t 2016 or the first part of 2017,” said Alexander.
“There are certain neighbourhoods in Toronto that have performed very well despite government intervention and the cooling markets around them,” he said, mentioning Etobicoke, Rosedale and Yorkville.
But Markham and Richmond Hill will still see softening, he predicted.
Breaking down the market
How much heat buyers and sellers experience this spring will depend on the kind of property and the area in which they are trading.
If there’s a heat island in the GTA, it’s downtown where properties are routinely getting snapped up, says Desmond Brown of Royal LePage.
Brown reports that the take-no-prisoners atmosphere of 2016 and early 2017 has mellowed. Even in competing bid situations, the selling price for houses tends not to be a crazy amount over asking and there’s frequently room to negotiate.
A buyer on one property that had multiple bids had a successful offer that included a home inspection, he says. Financing conditions can also be written into offers.
Still, he advises, if you’re buying, “You’ve got to do your best to have the cleanest offer possible.” That can mean arranging a home inspection before the offer date or asking for one the seller has done in advance. Buyers should also make sure their financing is pre-approved, he says.
It’s a real estate cliche, but it really is all about location and that’s truer than it was during the peak, says Brown.
“Last year, where we were seeing things selling in just about any location, this year buyers are a lot more discerning,” he says. They will pay attention to the condition of neighbouring homes, and properties on main streets will take longer to move.
“A lot of young people in financial services and the tech industry have the money to spend. They want to be within walking distance for work or a short transit ride and they’re still paying top bucks,” says Brown.
The $ 1-million price that would be a psychological barrier doesn’t apply to the hot downtown market, says John Pasalis, president of Leslieville brokerage Realosophy.
“Prices of $ 1.3 million, $ 1.5 million — those are still competitive down here — if you’re on the subway line,” he says. “It’s when you get north of $ 2 million that it starts getting slower.”
The pain of the real estate bubble lingers in the communities outside Toronto, particularly in areas like York Region where speculation played a big role in driving up the market before last April, says Realosophy’s Pasalis. Overall, he’s expecting a balanced market, but the farther from the core you are, the more inventory there is, he says.
In Durham Region, one of the most affordable areas of the GTA, the average price rose to $ 598,000 from $ 578,000 between January and March, says Dennis Roberts, president of the local real estate association. The average number of days on the market has dropped from about 30 to 18 during the same period. The extension of Highway 407 and expanded GO train service are raising Durham’s value because commuters to Toronto have alternatives to sitting in congestion on Highway 401.
Lower-priced properties are moving more quickly than bigger houses, but the empty nesters living in those have fewer options in Durham where condo development has lagged other areas of the GTA, he says.
“They really don’t have many options of where to go. So we need to get a bigger choice for them. We need more supply for that bungalow-condo market, larger condos. They don’t want to go down to 800 sq. ft.,” says Roberts.
Mississauga and Oakville are starting to climb back out of the January doldrums, but the heat generated in downtown always takes a while to work its way west in the Toronto region, says Tracy Nursall of Sage Real Estate.
“We’re just heading into spring now where Toronto’s already in spring market,” she says. “April is coming out of the gate a little faster, but it’s not bolting out of the gate.”
Increasingly, buyers in 905 communities are looking for the same kind of destination neighbourhoods that make downtown Toronto attractive, says Nursall. They will be quick to pounce on the new neighbourhoods being built around Port Credit in Mississauga, she says.
“Hamilton’s taking a lot of eyeballs because they’ve got a great culture and foodie scene,” says Nursall.
Condos are the housing market that uniformly evoke superlatives and challenge buyers. It’s not unusual for a downtown condo to draw 10 to 15 offers, says Christopher Alexander of Re/Max.
“The condo market just continues to defy expectations,” says Andrew Harrild of Condos.ca
Multiple offers and over-asking prices are the norm. But, he says, supply is an issue as condo owners struggle to make their next move.
“It’s very difficult for buyers to afford a house in the city,” he says.
Downtown condos also offer a lifestyle their owners value, says Harrild. He says he recently met with a couple who were considering listing their downtown loft, but they were struggling with whether they could stand to live farther than a two-minute walk to the stores and restaurants they enjoy.
“If you want that patch of grass are you willing to sacrifice on location to get it,” he says.
Royal LePage’s Brown calls the condo market “completely nutty on everything under the $ 700,000 range.”
Once the price approaches about $ 800,000, condos start to look expensive. Add in maintenance fees and the cost resembles a $ 1.1 million house, he says.
Brown cites a condo in Regent Park that was listed for $ 455,000. He figured it might be worth up to $ 550,000. It sold for about $ 600,000 after atttracting 13 offers.
Home buyer behaviours
Ontarians who feel they can afford to buy a home that suits their family’s needs.
Ontarians who put access to parks and green spaces as their top home-buying consideration, compared to 50%, who put proximity to work as their chief concern, followed by access to stores (45%) and nearby public transit (36%)
Ontarians who had to compromise on the size of home and their budget because of government regulations.
Source: Leger survey for Re/MAX Spring Market Trends report