James Warren, real estate agent with Chestnut Park Real Estate Ltd., says he is advising homeowners to hold off in areas with abundant inventory.Fred Lum/the Globe and Mail
A surfeit of listings in many Toronto neighbourhoods has prompted an increasing number of real estate agents to resort to an unfamiliar strategy: they are discouraging homeowners from listing their homes for sale.
In early July, some sellers who have failed to land a deal have recently taken their properties off the market while buyers vacillate.
James Warren, real estate agent with Chestnut Park Real Estate Ltd., says he is advising homeowners to hold off in areas with abundant inventory except in cases where they need to list because of a job transfer, an estate sale or another pressing reason.
“Unless I absolutely had to, I would wait until the fall,” says Mr. Warren. “The audience isn’t listening right now.”
Mr. Warren does much of his business in Rosedale, where one luxury property traded hands in November for $21-million.
“The gentleman bought it for full price, first showing,” says Mr. Warren.
The problem since, Mr. Warren says, is that other homeowners in the upscale enclave have been setting asking prices around the $20-million mark, aiming for a similar result without success.
“People are pricing their houses off this one sale.”
As inventory in Rosedale soared in recent weeks, a cluster of properties sat unsold at that level.
“You can’t have seven or eight houses in Rosedale at $20-million-plus. Where are the buyers?”
The $21-million property had some elements that neighbouring properties can’t match: The sale and closing took place quickly as 2023 wound down because hikes to the City of Toronto’s municipal land transfer tax rate for homes valued above $3-million were set to come into effect on Jan. 1.
Another draw was that the house was built about 10 years ago, which is unusual in an enclave of homes protected by heritage conservation rules.
Mr. Warren says that some sellers prefer to set an ambitious asking price at the start but that can backfire quickly. Agents with competing listings point to the value that their property offers by comparison.
“If you’re not well-priced you’re going to sit,” he says. “You’re going to be used to sell other houses that are better priced.”
Anita Springate-Renaud, broker with Engel & Volkers in central Toronto, believes buyer confidence is slowly building. She points to a home in her own neighbourhood of Lawrence Park, where inventory is tight.
“It was on for just over a week and sold for $9-million.”
But at the lower end, buyers who rely on a mortgage are waiting for interest rates to drop further.
She says some sellers are pulling their listings with a plan to relist in September.
Ms. Springate-Renaud recently took down the listing for a condo on Blue Jays Way with an asking price of $829,000.
“If you don’t need to sell, let’s wait for the inventory to come down,” was her advice to the owner.
Despite the more frequent recommendations from agents that homeowners hold tight, Ms. Springate-Renaud says the photographers and stagers she talks to remain busy prepping more properties.
“My stager was glad to get some of her stuff back. It was in a property forever and it didn’t sell.”
The positive news for thwarted would-be sellers, is that the outlook for the second half of the year is a little brighter.
Rishi Sondhi, economist with Toronto-Dominion Bank, is predicting that sales in Toronto, Vancouver and other cities across Canada will soon begin to gain traction after a sluggish spring.
Still, in his latest cross-country report on the housing market outlook, Mr. Sondhi cautions that the nascent recovery is likely to be only mediocre because cuts to interest rates on both sides of the border may take longer than economists had previously expected.
“You really need more meaningful rate relief,” Mr. Sondhi said in an interview.
TD is forecasting the next Bank of Canada cut will come in September after a pause at the July 24 meeting.
The U.S. Federal Reserve, meanwhile, recently signalled that a rate cut will likely be pushed off until late 2024. The delay will spill over onto Canadian bond yields, which will likely see more limited declines over the remainder of the year as a result, Mr. Sondhi says.
That in turn will keep fixed-term mortgage rates in Canada from falling as quickly as expected.
The strongest sales gains in the country should come in Ontario and British Columbia, Mr. Sondhi says, because buyers in those provinces have plenty of pent-up demand to unleash.
As for prices, Mr. Sondhi noted that the national average price managed to grind higher in the spring as more expensive homes took a larger share of the sales pie.
That trend is particularly notable in the Greater Toronto Area, where the swelling inventory in the condo market put downward pressure on prices at the lower end. Meanwhile, relatively fewer listings in the detached home segment put a floor under those prices, he says.
Mr. Sondhi is forecasting that the average price in Ontario will edge down 0.2 per cent in 2024 because of the relatively loose supply compared with muted demand.
Across Canada, new listings are roughly in line with the long-term average, Mr. Sondhi notes, but in Ontario, that figure is about 5 per cent higher than the long-term average.
In May, the sales-to-new-listings ratio stood at about 40 per cent in the GTA, which puts the market in balanced territory.
Mr. Sondhi says he hears anecdotally from agents about properties sitting for a longer time.
As more agents caution sellers against launching a property on the market now if they don’t have to, Mr. Sondhi says a delay may make sense.
“You don’t necessarily want to be listing your home in that environment.”
Looking farther out to 2025, Mr. Sondhi lifted his growth forecasts for sales and prices as more of those buyers on the sidelines move into the market and relief from high interest rates is more apparent.
In Ontario, Mr. Sondhi predicts the average price will jump four per cent next year.
There may be an upside surprise if bond yields fall more sharply, Mr. Sondhi says, while the downside risk to his forecast includes federal government policies which could rein in population growth in the coming quarters.
He’s also cautiously watching the condo market in the GTA and beyond to see if listings rise more significantly than he expects, which could in turn drag down the average price.
Mr. Warren points out that buyers in the various tiers of the market may be affected by different economic forces, but the dynamic in one segment cascades into another.
Buyers in the upper echelons often hold a portfolio of assets and can buy a home without a mortgage, but they are usually moving up from an existing property.
Mr. Warren says gridlock appears to be starting around the $5-million mark because buyers purchasing a house for less than that tend to need financing and many are waiting for a drop in mortgage rates.
“If someone buys for $20-million, and sells an existing house for $10-million, the person who is buying that house may be thinking about interest rates. The person who buys their house is definitely going to be sensitive to interest rates,” he explains.
And while inventory was shooting up in Rosedale and other high-end pockets during the spring, he says, many buyers on the fence were in no rush to pull their money out of stocks with equity markets climbing.
Mr. Warren believes some sellers with asking prices above $5-million need to reduce that amount by 10 to 15 per cent.
In his opinion, the old adage that the three most important factors in real estate are ‘location, location, location’ is outdated.
Price is paramount for attracting buyers in today’s market, he says, followed by a good renovation. Location has fallen to third on the list, he says.
Learning the reason one house sells while another languishes is key to setting a price, he says.
He points to the recent sale of one Rosedale property that drew three offers and sold in the $15-million range after it was listed with an asking price of $11-million. Competition erupted because the house was recently renovated, he says.
One of the couples that bid on that property then paid the full asking price of $18.5-million for a nearby house because they didn’t want to lose another one, Mr. Warren says.
Many people selling luxury properties in Forest Hill and Rosedale are downsizers who want to buy a townhouse or condo, he says. They learn about transactions at full price and resist reducing their own asking price, he adds.
“They don’t need to sell. They have the financial capability to stay in the house.”
But Mr. Warren says homeowners who set an asking price that’s too rich to start with do themselves a disservice because the house soon appears stale and the buyers have more leverage.
“Then if you are going to reduce, hold your breath,” warns Mr. Warren. “Now you’ve brought it down 15 per cent and you’re going to have to sell 5 to 10 per cent below that.”
Many of the houses that have been sitting in Toronto’s more exclusive areas belong to empty nesters who last renovated when their kids were young, he says, and family lifestyles have changed.
Some potential buyers are willing to take on a renovation, but they must factor in the cost and duration of the project, and they have to worry that their existing house in a lower price range may not sell.
In addition, higher prices, higher interest rates and the higher land transfer tax are all adding up to a market that is struggling above $5-million, he says.
A reno may take two-and-a-half years, and many families choose to find a rental property for between $8,000 and $20,000 a month, Mr. Warren says, to avoid having their kids change schools.
In addition to mounting costs, a reno brings upheaval, Mr. Warren says.
“The other thing to consider is, how strong is my marriage and tolerance for doing this? Somebody’s got to go over there every day at 7:30 a.m. to see if they showed up, and say, ‘I didn’t order that tile.’”
Both of the main candidates in British Columbia‘s election campaign pushed their own plans to solve parts of the housing crisis.
B.C. Conservative Leader John Rustad told a news conference in Surrey that his government would end the multi-year permit delays and would get homes built at the speed and scale needed to address the housing crisis.
NDP Leader David Eby went to Cumberland on Vancouver Island to promote his party’s plan to fast-track factory-built homes.
Eby said pre-built homes would cut waste, reduce emissions, and advances in the industry mean the homes are “beautiful and high-quality.”
He said the process was “more like Lego” than normal construction.
“The idea is pretty straightforward. In a controlled factory environment, you can build faster, you can build with less waste and the homes that are built are more consistent and more efficient and it’s cheaper.”
Rustad said the Conservative Party of B.C. would redesign the approval process for home building, setting a six-month limit for rezoning and development permit and three months for a building permit.
“This means that we will significantly be able to improve the time frame it takes to actually get construction happening in this province, and we’ll be working with city halls across the province to be able to meet these timelines,” Rustad said.
If a clear yes or no isn’t issued by a city within that limit, the province would issue the permit, said a B.C. Conservative news release announcing the platform.
Rustad said the party would remove NDP taxes on housing, support transit-oriented communities, reform development cost charges and make taxes fair for homeowners.
“We have so much regulation that has been put in place associated with housing that it makes it really difficult for anybody to be able to actually get through and build things, not to mention the cost,” he said. “So we’ll amend the Local Government Act to prevent any home killing red tape that has been introduced by this government.”
The party’s statement also outlined their zoning plan, adding that it would work with BC Assessment “to make sure that current homeowners don’t get hit with higher tax bills based on future potential.”
The party statement said, if elected, a Conservative government would build new towns, saying B.C. is blessed with an abundance of land, but the NDP refuses to use it to end the housing shortage.
“We will identify land outside the Agricultural Land Reserve that has the potential to support beautiful new communities.”
A statement issued by the NDP on Friday said it would work with industry, municipalities and First Nations to create a provincewide framework for prefabricated homes so builders know what’s required in every community.
It said there would be a pre-approved set of designs to reduce the permitting process, and it would work to develop skills training needed to support prefabricated home construction.
The statement said Scandinavian countries had embraced factory-built homes, which “offer an alternative to the much slower, more costly process of building on-site.”
“By growing B.C.’s own factory-built home construction industry, everyone from multi-generational families to municipalities will be able to quickly build single homes, duplexes and triplexes on land they already own,” Eby said.
The party said legislation passed by the NDP government last year was a “game changer” for the factory-built home construction industry in the province, where there are currently 10 certified manufacturing plants.
Muchalat Construction Ltd. is one of them, and owner Tania Formosa said pre-approved structures speed up the building process considerably.
She said her company’s projects currently take 12 to 13 months to complete, from startup design to getting the house on site.
“If everything was in place and fast-tracked at the beginning and we were able to just fly along, it would probably take three months off the full schedule,” she said.
She said a main issue for modular manufacturers is that work gets stalled if they run into roadblocks with jurisdictions or BC Housing in the approval process.
“There’s no option for the manufacturer to start another project,” she said. “Having our products approved prior to the process would be amazing.”
She acknowledged the potential drawback of pre-approved designs creating a cookie-cutter look for some neighbourhoods.
“Unfortunately (what) happens in your jurisdiction, in your city, is it ends up looking a lot the same, but what are your priorities?”
This report by The Canadian Press was first published Sept. 27, 2024.
The Canada Mortgage and Housing Corp. says construction of new homes in Canada’s six largest cities rose four per cent year-over-year during the first half of 2024, but housing starts were still not enough to meet growing demand.
The agency says growth in housing starts was driven by significant gains in Calgary, Edmonton and Montreal.
A total of 68,639 units began construction, the second strongest figure since 1990, however the rate of housing starts per capita meant activity was around the historical average and not enough “to reduce the existing supply gap and improve affordability for Canadians.”
The report says new home construction trends varied significantly across the markets studied, as Toronto, Vancouver and Ottawa saw declines ranging from 10 to 20 per cent from the same period last year.
Apartment starts in the six regions increased slightly, driven by construction of new units for rent, as nearly half of the apartments started in the first half of 2024 were purpose-built rentals.
But condominium apartment starts fell in the first six months of the year in most cities, a trend which the agency predicts will continue amid soft demand as developers struggle to reach minimum pre-construction sales required.
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
