Buyers, sellers continue to grapple with uncertainty in GTA real estate market

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The fits and starts of the Toronto-area real estate market seem to be continuing into November as both buyers and sellers grapple with uncertainty.

John Pasalis, president of Realosophy Real Estate Inc., says new listings swelled in the Greater Toronto Area in the early part of November compared with this time last year. It's too soon to tell if this is a blip or a trend, he cautions, but he believes the current is strengthening.

According to Mr. Pasalis' data, new listings for freehold properties soared 34 per cent in the first week of November compared with the same period last year. New listings for condo units jumped 25 per cent in the first week compared with the same period in November, 2016.

Mr. Pasalis says the activity may be partly generated by the relisting of properties that didn't sell on the scheduled offer night, or that have been languishing for a while. But he also sees some sellers hustling to list before new "stress test" rules surrounding mortgages come into effect on Jan. 1st.

After that date, people who seek a mortgage from many lenders will have to show that they can afford to pay a higher rate of interest than they would currently pay at the time of purchase. The more severe qualifications were unveiled last month by the Office of the Superintendent of Financial Institutions (OSFI), which regulates the banking industry.

Mr. Pasalis says the increase in November is much more dramatic than in October, when new listings rose 11.8 per cent compared with the same month last year. "It's a lot higher than we saw in October."

He was particularly surprised by the increase in the condo segment. "It's tough to make sense of why the condos are increasing."

Sometimes new listings for condos surge when new projects are completed, he points out.

As for buyers, some anticipate that the market will deteriorate in 2018, so they're hitting pause, Mr. Pasalis says.

He adds that some buyers are still expressing uncertainty about the impact of the OSFI rule changes, but they're not rushing out to buy before they come into effect. Someone with a budget of $950,000 figures their budget might drop to $850,000, for example, but they're not perturbed.

"They're very matter-of-fact," he says. "It's interesting to see buyers, who know their budget is going to get slashed, not get caught up in rushing to buy now."

Benjamin Reitzes, economic strategist at Bank of Montreal, says the dynamics in the Toronto market appear to be lagging the action in Vancouver by about nine months.

Mr. Reitzes says the Vancouver-area market is bouncing back with gusto as the drag from the foreign buyers' tax put in place in August of 2016 in British Columbia has fallen out of the equation. Sales of condos and townhouses are surging while single-family homes continue to sit.

After Ontario implemented its own foreign buyers' tax in April of 2017, Toronto-area buyers are also favouring condos and townhouses over detached houses.

"It looks as if domestic buyers have been driven into more affordable segments of the market with single-family homes in Vancouver and Toronto out of reach for the average family," Mr. Reitzes says.

Activity continues to grind higher in Ottawa and Montreal, he adds, while the prairie provinces remain sluggish.

In downtown Toronto, where Realosophy does most of its business, sellers are quite optimistic because sales are still quite brisk in many neighbourhoods, Mr. Pasalis says.

The big question agents are hearing from potential clients now is, when is the right time to buy or sell?

"We're getting that on both sides," says Mr. Pasalis, referring to both sellers and buyers. "In general, we advise people not to really time the market – because you can't."

He recommends that house hunters focus on finding the home that fits their needs rather than trying to pick the bottom of the market.

"If you're buying for the long term, if the market dips another 5 per cent, it's not the end of the world," he says.

Similarly, homeowners should sell when it suits them. Mr. Pasalis advises keeping an eye on the market but not letting shifting dynamics determine what should be a more measured decision.

"People are usually too anxious to buy if it does slow down," he points out.

The market downturn in the spring and early summer of 2017 is a prime example of that phenomenon, he adds, as frantic buyers suddenly froze.

"A lot of buyers who bought then got very good value because there were a lot of desperate sellers."

This month, Mr. Pasalis is finding that houses with wide appeal draw multiple bidders. But less attractive houses, or those in undesirable locations, are sitting longer - especially if the asking price is too rich. Neighbourhoods in the core are generally faring better than those on the outskirts.

"I think it's very confusing for buyers because there's not one story."

Chris Kapches, president and chief executive officer of Chestnut Park Real Estate Ltd., regards the market in the Toronto area as strong and stable compared with this time last year. It's also calm following the unsustainable frenzy of early 2017, he adds.

In a market report, Mr. Kapches notes that supply is much stronger this fall than last, while the Bank of Canada's key interest rate has risen.

He points to last year's lack of supply and historically-low mortgage rates as two of the drivers for the blistering run-up from January to April.

Now the market's pace is more sustainable, in his opinion.

"Buyers are still alive. They are more deliberate," he says.

Mr. Kapches also points out that sales of high-end properties improved in October compared with September. Looking at transactions for properties at $2-million or above, 208 deals took place last month. That marks a 10.6 per cent increase from September.