Toronto housing market shows signs of firming

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On a recent July night in East York, real estate agents in their cars sat outside a semi-detached house listed with an asking price of $849,000.

The scene, said Rochelle DeClute of Union Realty Brokerage Inc., was more reminiscent of Toronto-area real estate in the spring of 2017.

By the end of the night, the sellers received 10 offers and the house sold for $1.06-million.

Ten used to be a small number of bids for a house in that price range, but by 2018 standards it’s a strong turnout. Ms. DeClute sees it as one signal the market is firming.

In the past couple of weeks, Ms. DeClute’s firm has sold two houses above $4-million. One had been on the market for nearly four months and the other for about one month.

“The higher end had been very much at a standstill, but now it seems to be moving again.”

Ms. DeClute said she had noticed more hits to the website and more appointments booked for both properties in the past couple of weeks. The house that had been on the market for a few months was attracting new interest, but the purchaser was a buyer who first looked at it some time ago.

“We did have more showings at the end for sure and one buyer who did come back.”

In all price ranges, the Toronto market feels more typical of late June, when buyers who have been biding their time will often make a decision before they settle into summer vacation, she said. Usually by the beginning of August, the market is drowsy.

“It’s usually our quietest time ever, but we’re seeing it pick up.”

After a spring market that sputtered and stalled, Ms. DeClute figures cautious buyers are feeling a little more confident the market does not have further to fall. She has also seen a return of investors who had been sitting on the sidelines for the past year or more.

In recent weeks, she has heard from potential buyers who are looking for an income property. They’ve decided to buy now before the market goes on another tear, she said.

The real estate portal Juwai.com says overseas investors from China are still interested in Canada and other countries, but there’s not the hysterical rush to invest overseas that happened in 2016.

Carrie Law, chief executive at Juwai.com, said China-based investors feared the country’s currency was facing rapid and possibly repeated devaluation amid unprecedented capital outflows in 2016. There was also serious concern about the potential for a significant slowdown in economic growth, she added.

Today, the psychology of Chinese international property investors has changed and most are more confident Beijing can manage economic growth and the yuan, Ms. Law said.

She predicted relatively slow but steady growth in Chinese buying of overseas real estate in the coming 12 months. She added that prices for real estate in Canada may appear more affordable to Chinese investors than U.S. real estate because the U.S. dollar has strengthened more dramatically against the Chinese currency.

The most popular destinations for Chinese buyers are Toronto, Montreal, Vancouver, Calgary and Ottawa, according to searches on Juwai.com.

Ms. DeClute, who specializes in the Beaches and other east-end Toronto neighbourhoods, pointed out the median price for a detached house in the E02 buying area is currently around $1.289-million. At the end of July, 2017, it was $1.295-million.

“We seem to be where we were last year at this time.”

The Toronto Real Estate Board’s E02 area stretches from Danforth Avenue to Lake Ontario, between Coxwell and Victoria Park Avenues. It includes the Beaches and Upper Beaches.

Currently, there are 44 active listings in E02, compared with 59 at the end of July last year, Ms. DeClute said.

The scarcity of listings helps to keep prices firm. It discourages more listings, however, because potential sellers are afraid they won’t be able to find another property to buy.

Ms. DeClute was seeing lots of conditional offers in the spring – including some buyers inserting a clause making the deal conditional on the sale of an existing property.

Most years, Ms. DeClute said, she would advise homeowners against listing in the somnolence of summer. But this year, the buyers are circulating, she said.

“We’ve traditionally said, ‘Don’t launch in August, no matter what.'” However, her team recently listed another two homes above the $4-million mark.

“There are buyers out there and they’re willing to pay the money.”

One change Ms. DeClute has noticed is that potential buyers expect properties to be listed close to market value, even when multiple offers are expected. The appetite for seeing a house listed with a lowball price has diminished, she said.

While bidders were lobbing offers $500,000 or more above the asking price in 2017, that kind of eye-popping premium is rare these days, she said.

A more typical scenario is that properties are listed with a fairly realistic asking price and the winning bid might come in at $25,000, $50,000 or $100,000 more.

“In our industry, we’re having to be more accurate in our pricing and that’s a good thing.”

Ms. DeClute said recent increases in mortgage rates have not deterred many buyers. Some who have preapprovals for mortgages are inclined to buy more quickly before rates possibly rise again, she said.

In addition to seeing offers conditional on the buyer lining up financing, she’s also seeing offers that are conditional on the property being appraised at the sale price.

Banks are also tougher in making sure an appraiser deems the property to be worth the negotiated price, she added.

“The banks are being a little more cautious,” Ms. DeClute said.

Talking to real estate lawyers and mortgage brokers, she has heard of deals where the bank’s appraiser declares that the buyer paid too much. In those cases, buyers sometimes have to scramble to find another source of funding to close the gap, she said. In other instances, the buyer will try to get a second opinion with another appraiser.

“People do dispute appraisals sometimes.”

And in another twist, lenders have been known to insist on a second appraisal just before closing to make sure the property’s value didn’t fall between the time the deal was inked and the closing date several months later.

However, Ms. DeClute thinks the recent stability in the market will make those nerve-racking scenarios less likely.

If prices remain strong, sellers who pulled their listings in June will return after Labour Day, she predicted. She is also receiving calls from homeowners who are considering a sale in September.

“If right now is any indication, I think we’re going to have a very busy fall market.”