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One-upmanship is skewing Toronto real estate prices – The Globe and Mail

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Houses with real estate signs are pictured in Leslieville, Toronto, on Tuesday, October 12, 2021. (Christopher Katsarov/The Globe and Mail)

Christopher Katsarov/The Globe and Mail

The whole neighbourhood hears about it when real estate alchemy causes one house in the area to sell for an outrageously high price.

Some properties just seem to hit a sweet spot during a week when lots of buyers are out, says Scott Hanton, broker with The Weir Team Brokerage Inc. in Toronto.

Those deals are a fluke, Mr. Hanton says and the sale price should be looked as a one-off.

He sees the pitfalls first-hand when nearby homeowners incorrectly believe that their property should sell for the same amount or higher. When buyers give in to these egomaniacal and ridiculously lofty expectations, prices shoot up and kill affordability for everyone else, he says.

“It is insanity,” says Mr. Hanton, who has been involved in deals recently that he predicts will skew real estate values from downtown Toronto to Ajax, Ont. “It’s really hard to get sellers to come down from those heights and it makes it really hard for the buyers.”

Mr. Hanton says homeowners often believe their house is special but the determination to set a new high water mark every time is stronger than ever.

“This has been a dominant theme this year more than any other year I can recall in real estate,” he says.

In the Ajax deal, Mr. Hanton represented buyers who wanted to buy in a very specific quadrant. When a house arrived on the market with an asking price around $999,000, the clients decided it would suit them perfectly.

Mr. Hanton advised them to step up with a tempting bully offer right away, rather than wait for the offer date one week later.

The clients submitted a bid of $1.275-million.

“Although we offered well, well, well over the asking price, the seller came back and said, ‘I want an even more ridiculous amount.’”

The seller wouldn’t budge from $1.3-million, says Mr. Hanton, so his clients paid it.

“The problem with that is, his neighbours are going to think their house is worth that,” he says. “I feel sorry for all the other buyers.”

Mr. Hanton says the homes in the area are very typical suburban homes that were trading for $1-million at the end of last year, then jumped up to $1.2-million during the heated days of January, February and March.

“My buyers just paid 1.3. It really makes the market crazy.”

Mr. Hanton has seen a slew of deals recently where an appraiser determines that the sale price exceeds market value. In those cases, the lender typically requires a larger down payment to bridge the gap.

“There’s no bank in the world that’s going to appraise this house.”

His clients have the flexibility to come up with more cash but many buyers don’t.

“They can get in way over their heads.”

In East York, Leslieville and other popular Toronto neighbourhoods, house hunters seeing such eye-watering prices are feeling a lot of frustration and fatigue, Mr. Hanton says.

“I think a lot of the buyers are just mentally exhausted.”

He has worked with one couple who need to take a break after losing out in too many bidding contests.

“That was so emotionally draining that they’ll pack it in for the rest of the year.”

Others are thinking more seriously about leaving the city all together, he says.

But while the outlier sales and lack of supply send prices shooting up, Mr. Hanton cautions that the market has been very halting recently.

“The fall market really was slow for a lot of people,” he says. “I’ve been warning all of my sellers that it’s so unpredictable.”

National Bank of Canada economist Daren King notes that sales in the Greater Toronto Area edged up 0.7 per cent on a seasonally-adjusted based in September from August but supply melted.

Compared with September, 2020, sales dropped 18 per cent last month.

Seasonally adjusted listings dropped 5.3 per cent at the end of September from August. That marks the seventh consecutive monthly decrease and the lowest level since February, 2017, Mr. King says.

“The lack of supply, which certainly accounts for some of the market slowdown in recent months, will continue to have an upward effect on home prices in the months to come,” he says.

Mr. Hanton has been working with one seller recently who is suffering from the same syndrome of wanting a price based on what the neighbour’s house sold for.

In this case, the property near Don Mills Road and Sheppard Avenue has been on the market for about two months with an asking price around the $2-million mark.

“The seller feels he should just sit tight and maybe he’ll get his number – and maybe he will,” Mr. Hanton says. “It’s the classic, stubborn Toronto seller.”

A lot of sellers have great houses, Mr. Hanton says, but they are often very specific to that seller. The ones that spark intense competition appeal to a broad range of people.

“Once sellers get a number in their head, it’s very hard to get it out,” he says.

If sellers are holding out for $2-million and receive an offer for $1.8-million, for example, they believe they are giving up $200,000.

That’s a misguided perspective, Mr. Hanton explains, because they’re not losing anything.

“It’s hard to get them to overcome that – they never had $2-million on the table,” he says.

Mr. Hanton says more listings are coming after the long weekend for buyers who do have the fortitude to carry on.

He will be listing a semi-detached home in Georgetown, Ont., for $899,000, but he will let the market dictate the sale price.

The house is in the historic part of town and has been converted from a larger property.

“It’s a very unique one. We’ll see what $899,000 gets us.”

Mr. Hanton decided to have a public open house for a three-bedroom house listed with an asking price of $989,000 near Woodbine Avenue and Danforth Avenue over the Thanksgiving weekend. No one currently lives in the house, he says, so his team was hosting an open house for the first time since they’ve been allowed after pandemic measures closed them down.

“The year has been so unpredictable, we’re trying new things,” he says.

Elli Davis, a real estate agent with Sotheby’s International Realty Canada, says some agents prefer to launch new properties after Thanksgiving because they believe buyers will be out of town during the long weekend.

But Ms. Davis likes to make new listings available because lots of people stay in town and they have extra time, she says.

“Still people are not travelling as much as usual,” she adds.

Ms. Davis was also testing out the appetite of buyers for a return to open houses.

Ms. Davis says agents have been discouraged from holding open houses during the pandemic and serious buyers were more likely to make an appointment.

But she believes the tradition is making a comeback.

“I think the agents are really going to open up the public open houses.”

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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B.C. voters face atmospheric river with heavy rain, high winds on election day

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VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.

Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.

The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.

Wednesday was the last day for advance voting, which started on Oct. 10.

More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.

Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.

An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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No shortage when it comes to B.C. housing policies, as Eby, Rustad offer clear choice

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British Columbia voters face no shortage of policies when it comes to tackling the province’s housing woes in the run-up to Saturday’s election, with a clear choice for the next government’s approach.

David Eby’s New Democrats say the housing market on its own will not deliver the homes people need, while B.C. Conservative Leader John Rustad saysgovernment is part of the problem and B.C. needs to “unleash” the potential of the private sector.

But Andy Yan, director of the City Program at Simon Fraser University, said the “punchline” was that neither would have a hand in regulating interest rates, the “giant X-factor” in housing affordability.

“The one policy that controls it all just happens to be a policy that the province, whoever wins, has absolutely no control over,” said Yan, who made a name for himself scrutinizing B.C.’s chronic affordability problems.

Some metrics have shown those problems easing, with Eby pointing to what he said was a seven per cent drop in rent prices in Vancouver.

But Statistics Canada says 2021 census data shows that 25.5 per cent of B.C. households were paying at least 30 per cent of their income on shelter costs, the worst for any province or territory.

Yan said government had “access to a few levers” aimed at boosting housing affordability, and Eby has been pulling several.

Yet a host of other factors are at play, rates in particular, Yan said.

“This is what makes housing so frustrating, right? It takes time. It takes decades through which solutions and policies play out,” Yan said.

Rustad, meanwhile, is running on a “deregulation” platform.

He has pledged to scrap key NDP housing initiatives, including the speculation and vacancy tax, restrictions on short-term rentals,and legislation aimed at boosting small-scale density in single-family neighbourhoods.

Green Leader Sonia Furstenau, meanwhile, says “commodification” of housing by large investors is a major factor driving up costs, and her party would prioritize people most vulnerable in the housing market.

Yan said it was too soon to fully assess the impact of the NDP government’s housing measures, but there was a risk housing challenges could get worse if certain safeguards were removed, such as policies that preserve existing rental homes.

If interest rates were to drop, spurring a surge of redevelopment, Yan said the new homes with higher rents could wipe the older, cheaper units off the map.

“There is this element of change and redevelopment that needs to occur as a city grows, yet the loss of that stock is part of really, the ongoing challenges,” Yan said.

Given the external forces buffeting the housing market, Yan said the question before voters this month was more about “narrative” than numbers.

“Who do you believe will deliver a better tomorrow?”

Yan said the market has limits, and governments play an important role in providing safeguards for those most vulnerable.

The market “won’t by itself deal with their housing needs,” Yan said, especially given what he described as B.C.’s “30-year deficit of non-market housing.”

IS HOUSING THE ‘GOVERNMENT’S JOB’?

Craig Jones, associate director of the Housing Research Collaborative at the University of British Columbia, echoed Yan, saying people are in “housing distress” and in urgent need of help in the form of social or non-market housing.

“The amount of housing that it’s going to take through straight-up supply to arrive at affordability, it’s more than the system can actually produce,” he said.

Among the three leaders, Yan said it was Furstenau who had focused on the role of the “financialization” of housing, or large investors using housing for profit.

“It really squeezes renters,” he said of the trend. “It captures those units that would ordinarily become affordable and moves (them) into an investment product.”

The Greens’ platform includes a pledge to advocate for federal legislation banning the sale of residential units toreal estate investment trusts, known as REITs.

The party has also proposed a two per cent tax on homes valued at $3 million or higher, while committing $1.5 billion to build 26,000 non-market units each year.

Eby’s NDP government has enacted a suite of policies aimed at speeding up the development and availability of middle-income housing and affordable rentals.

They include the Rental Protection Fund, which Jones described as a “cutting-edge” policy. The $500-million fund enables non-profit organizations to purchase and manage existing rental buildings with the goal of preserving their affordability.

Another flagship NDP housing initiative, dubbed BC Builds, uses $2 billion in government financingto offer low-interest loans for the development of rental buildings on low-cost, underutilized land. Under the program, operators must offer at least 20 per cent of their units at 20 per cent below the market value.

Ravi Kahlon, the NDP candidate for Delta North who serves as Eby’s housing minister,said BC Builds was designed to navigate “huge headwinds” in housing development, including high interest rates, global inflation and the cost of land.

Boosting supply is one piece of the larger housing puzzle, Kahlon said in an interview before the start of the election campaign.

“We also need governments to invest and … come up with innovative programs to be able to get more affordability than the market can deliver,” he said.

The NDP is also pledging to help more middle-class, first-time buyers into the housing market with a plan to finance 40 per cent of the price on certain projects, with the money repayable as a loan and carrying an interest rate of 1.5 per cent. The government’s contribution would have to be repaid upon resale, plus 40 per cent of any increase in value.

The Canadian Press reached out several times requesting a housing-focused interview with Rustad or another Conservative representative, but received no followup.

At a press conference officially launching the Conservatives’ campaign, Rustad said Eby “seems to think that (housing) is government’s job.”

A key element of the Conservatives’ housing plans is a provincial tax exemption dubbed the “Rustad Rebate.” It would start in 2026 with residents able to deduct up to $1,500 per month for rent and mortgage costs, increasing to $3,000 in 2029.

Rustad also wants Ottawa to reintroduce a 1970s federal program that offered tax incentives to spur multi-unit residential building construction.

“It’s critical to bring that back and get the rental stock that we need built,” Rustad said of the so-called MURB program during the recent televised leaders’ debate.

Rustad also wants to axe B.C.’s speculation and vacancy tax, which Eby says has added 20,000 units to the long-term rental market, and repeal rules restricting short-term rentals on platforms such as Airbnb and Vrbo to an operator’s principal residence or one secondary suite.

“(First) of all it was foreigners, and then it was speculators, and then it was vacant properties, and then it was Airbnbs, instead of pointing at the real problem, which is government, and government is getting in the way,” Rustad said during the televised leaders’ debate.

Rustad has also promised to speed up approvals for rezoning and development applications, and to step in if a city fails to meet the six-month target.

Eby’s approach to clearing zoning and regulatory hurdles includes legislation passed last fall that requires municipalities with more than 5,000 residents to allow small-scale, multi-unit housing on lots previously zoned for single family homes.

The New Democrats have also recently announced a series of free, standardized building designs and a plan to fast-track prefabricated homes in the province.

A statement from B.C.’s Housing Ministry said more than 90 per cent of 188 local governments had adopted the New Democrats’ small-scale, multi-unit housing legislation as of last month, while 21 had received extensions allowing more time.

Rustad has pledged to repeal that law too, describing Eby’s approach as “authoritarian.”

The Greens are meanwhile pledging to spend $650 million in annual infrastructure funding for communities, increase subsidies for elderly renters, and bring in vacancy control measures to prevent landlords from drastically raising rents for new tenants.

Yan likened the Oct. 19 election to a “referendum about the course that David Eby has set” for housing, with Rustad “offering a completely different direction.”

Regardless of which party and leader emerges victorious, Yan said B.C.’s next government will be working against the clock, as well as cost pressures.

Yan said failing to deliver affordable homes for everyone, particularly people living on B.C. streets and young, working families, came at a cost to the whole province.

“It diminishes us as a society, but then also as an economy.”

This report by The Canadian Press was first published Oct. 17, 2024.

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