Toronto real estate: Ottawa’s efforts to cool house prices have slowed condo market, but GTA house prices continue to climb
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 1½-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, 2½, 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.”
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.
Although home sales were down 11.5 per cent 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 six per cent across the GTA, according to the Toronto Real Estate Board.
Semi-detached homes sold for an average $622,044 in the City of Toronto in mid-March, up a whopping 12.2 per cent from a year earlier (they were up just 2.9 per cent in the 905 regions to $398,328.)
Detached homes climbed by 7.2 per cent to an average $909,910 in Toronto, outpaced slightly in the 905 regions were a 7.7 per cent climb saw average prices hit $603,797.
Townhouses in the 416 region climbed by 8.2 per cent in mid March year over year to $447,460, compared to an almost seven per cent increase in the 905 regions to an average $375,420.
Even the cooling condo sector, where resale condo sales were down almost 10 per cent in mid-March year-over-year and listings have been climbing, saw price growth of 1.9 per cent in the City of Toronto, compared to just 0.2 per cent 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.”
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.
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.
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.
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.”
The frustration of what turned out to be a 1½-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.
“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.”
Source: Toronto Star