After a lacklustre fall in Toronto-area real estate, a few determined home buyers are willing to spar with competing bidders as 2023 draws to a close.
Elli Davis, real estate agent with Sotheby’s International Realty Canada, has sold three properties in competition in recent weeks.
In the Annex, three rivals vied for a seven-bedroom detached house with an asking price of $3.895-million. The Victorian-era three-storey home at 102 Bedford Rd. sold after seven days on the market for the full asking price.
The house needs a renovation, she says, but there weren’t many properties to choose from in the area and it’s increasingly difficult to find grand old homes with such original elements as unpainted oak trim and leaded glass windows.
In mid-town, Ms. Davis drew two offers for a detached four-bedroom house after trimming the asking price to $2.495-million from $2.685-million.
Ms. Davis listed the house in early November, then cut the price two weeks later. The house sold slightly below asking, she says.
In the case of a two-bedroom-plus-den condo unit near Yonge St. and St. Clair West, Ms. Davis set an asking price of $2.395-million and sold for $2.415-million with competing offers.
“It’s a decisive December,” says Ms. Davis of the buyers willing to make a move.
Some buyers keep an eye on properties they like, she says, and submit an offer with the hope that the seller is eager to land a deal before year-end. If a house has been sitting for longer than 90 days, buyers have more negotiating power, she adds.
Some house hunters also lob in a lowball offer to test the seller’s appetite for negotiation.
Ms. Davis also receives constant queries from agents representing buyers who try to pry out the lowest number a seller will accept. Others throw out a low figure the buyer is willing to pay and ask if writing up an offer would be a waste of time.
Sellers’ agents are not allowed to disclose that information, Ms. Davis stresses, insisting that buyers’ agents put pen to paper.
With buyers looking for a bargain and homeowners holding out for strong prices, the market is moving more slowly than usual for the month of December.
And while she has had a few deals which came together quickly in recent weeks, some properties are not moving, says Ms. Davis, who has had several of her listings since the summer.
“A seller has to be realistic now,” she says. If the offers are coming in much, much lower, the buyers think that’s what the house is worth.”
She’s advising homeowners who want to sell to take reasonable offers now or be willing to hold the property for two or three years.
The veteran agent recalls the early 1990s when real estate prices tumbled 40 per cent or more on some properties from the 1989 peak.
“A lot of people were chasing the market down,” she says.
Ms. Davis does not expect such a severe downturn in the next year or two but she does anticipate rising inventory in early 2024.
People will list for the usual reasons of moving up, downsizing and getting married or divorced, she says. In addition, some people who purchased during the phase of ultralow interest rates during the COVID-19 pandemic will not be able to hang onto their homes when they need to renew their mortgage, she expects.
“If you wait until next year, you’ll have more listings to compete with,” she says. “We don’t know what prices will be – even if they are slightly more or less – it won’t be anything dramatic.”
The two recent sales that Ms. Davis shepherded through a multiple offer process were among the first to take place since new rules came into effect on Dec. 1st.
The Government of Ontario’s Trust in Real Estate Services Act allows sellers who draw competing bids to disclose the amount of each offer to other bidders.
Ms. Davis presented that opportunity during the recent negotiations.
“Both sellers said, ‘I don’t want to disclose’.”
She doesn’t expect the regulations to have a major impact because the choice remains with the seller.
Mark Morris, a Toronto-based real estate lawyer with LegalClosing.ca, says the aim of the legislation is to make the sales process more transparent for consumers.
While new practices surround blind bidding, another aspect governs consumers who want to represent themselves instead of having industry representation.
As lawyer of record for many real estate brokerages, he was fielding a lot of calls from the industry as the changes approached.
“It’s a good piece of legislation coming out but there’s so much confusion surrounding it,” he said of the agents and brokers who will implement the changes.
While agents have seen a slight pick-up in deals in recent weeks, Rishi Sondhi, economist with Toronto-Dominion Bank, notes that the Ontario market is still facing challenges.
Mr. Sondhi believes it’s unlikely conditions will loosen to those last seen during the depths of the severe and prolonged 1990s housing downturn, but he doesn’t rule out the possibility.
He sees good reasons that a repeat of this extreme outcome is improbable, including the likelihood that Ontario will avoid a steep recession. He points out the potential for a more favourable path for interest rates, adding that the province is in the grips of a housing shortage and population growth is robust.
With per capita sales levels hanging around historical lows, the market likely has pent-up demand, Mr. Sondhi says.
Against that backdrop, the major wildcard is how the investor story plays out, the economist says.
In the run-up to the 90s downturn, speculative activity played an important role in fuelling a real estate bubble that eventually popped, he points out, but comparing the two periods is a major grey area because of a lack of data from the earlier decades.
An elevated investor presence is also a hallmark of the current cycle, accounting for 30 per cent of home purchases across Canada in the first quarter of this year.
Anecdotally he knows that higher interest rates today compared with recent years are making it tough for buyers to close on properties they purchased in the pre-construction market.
While Mr. Sondhi says the current difficulties in the pre-construction space are hard to gauge, he doesn’t anticipate a 90s-style outcome. He cautions, however, that prices may slide farther in the coming months.