High-end home buyers in Toronto wait on sidelines for the right price

The real estate market in Toronto has been uneven throughout 2018, but a couple of landmark estates recently found buyers.

Elise Kalles of Harvey Kalles Real Estate Ltd. says that both of the new owners are Toronto-based buyers who had been searching for some time.

In Rosedale, the palatial red-brick house on one acre of land at 10 Highland Ave. provides the new residents with six bedrooms, 11 bathrooms and a yew-panelled library. The deal was struck after the asking price was trimmed to $19.8-million from $22-million.

The imposing stone mansion at 120 Inglewood Dr. in Moore Park also changed hands. Set in more than two acres of land on the edge of a ravine, the property had an asking price of $12.98-million. The previous asking price was $14.8-million.

“I think they sold within a week of each other,” Ms. Kalles says.

Why the buyers didn’t see the houses sooner is impossible to know, Ms. Kalles says. Both properties had been listed for more than a year.

But she does sense that some house hunters had been waiting on the sidelines as they kept an eye on prices.

“A lot of them were waiting for the market to come down to buy,” she says, adding that shoppers will move decisively when they find the right house.

In lower price segments, agents are still seeing houses sell with multiple offers, she adds.

Strong employment is helping to boost confidence – even at the high end – because young people with good jobs move up the property ladder.

“It’s a domino effect. They sell their houses. They buy up.”

The luxury condo segment is also strong, she says, with buyers circling the Four Seasons, the Hazelton, and One St. Thomas in Yorkville.

A couple of years ago, Ms. Kalles had three units listed at the Four Seasons. Today, she only has one because they disappear quickly, she says.

A boutique building recently launched at 50 Scollard St. is fetching about $2,500 a square foot, she adds.

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“It’s a small percentage of people that can afford it, but they’re out there.”

Still, young homeowners in Canada’s big cities do struggle to afford the house they covet, a recent survey by Sotheby’s International Realty Canada found.

Sotheby’s says 83 per cent of young homeowners, a segment they call the "modern family” cohort, would prefer living in a detached, single-family home if they didn’t have to worry about their budget. Only 5 per cent would prefer condo ownership, according to the results.

Sotheby’s teamed with market research firm Mustel Group to survey potential homeowners, with an emphasis on young, urban families in which the adults are between the ages of 20 and 45.

About 56 per cent of respondents had actually purchased a detached house, Sotheby’s says. Forty-three per cent of the respondents who own real estate but not a single-family home say they have given up the “dream” of landing the house they want because they can’t afford it.

Of those surveyed, 18 per cent plan to buy a single-family home in the city centre in the future; 21 per cent plan to buy outside the city centre.

The report is based on a survey of 1,743 families in Vancouver, Calgary, Toronto and Montreal. The margin of error is plus or minus 2.3 percentage points 19 times out of 20.

Canada Mortgage and Housing Corp. warns the risk to Toronto’s housing mark is still set to “high”.

In its quarterly housing market assessment, the national housing agency pointed to Toronto real estate as richly valued – just not as inflated as it was at this time last year.

Over the past year, CMHC says, the average gap between actual house prices and price levels estimated by economic fundamentals has diminished.

In other words, prices are lofty compared with incomes, interest rates and the like.

In the second quarter of 2018, the Multiple Listing Service average house price adjusted for inflation and real personal disposable income decreased compared with the same period in 2017. Meanwhile, the population of young adults increased.

CMHC doesn’t see a lot of overbuilding in Toronto, pointing to the inventory of newly finished condos sitting on the market. That number shrunk in the second quarter of 2018.

The agency is also not sounding the alarm about price acceleration or runaway sales in Toronto.

Both of those measures remain in the cautious “yellow” zone.

Nevertheless, the rich values are enough to keep the overall risk assessment a bright shade of alarm-bell red.

Other cities with overall scores flashing red are Vancouver, Victoria and Hamilton.

Hamilton, west of Toronto, has seen a run-up in prices after buyers began to migrate there from the more expensive 416 area code.

House prices in Hamilton are high compared with incomes and other factors affecting people living in the city, according to CMHC’s assessment.

But the gap has narrowed as more people have flooded in. In the second quarter, the city’s population grew at its fastest pace in 16 years, CMHC says.

The housing market for the country as a whole is also viewed as highly vulnerable, according to CMHC, although overvaluation is easing nationally – as it is in Toronto – after a hair-raising 2017.