On the current state of affairs in the Toronto real estate market. I’m sure you’ve been on pins and needles waiting to hear from me!
As is always the case, we are constantly bombarded with mixed messages from different sources in the media regarding the overall health of the Toronto real estate market. Unfortunately, most of the headlines and articles that we see are misleading, exaggerated and downright scary. To cloud the issue even more, we also see reports (often from the same source on the same day or week) touting the overall health and merits of the Canadian real estate market. So… who do we listen to? What do we believe?
I’m not holding myself out as the ultimate authority on Toronto real estate, but I am out there everyday pounding the pavement, and this is what I’m seeing right now.
As you may or may not have noticed, there is a complete and utter lack of decent new listings in Toronto right now. At no point in my 10 years in the real estate business have there been fewer houses and condos for sale. Most of the currently available properties are either undesirable for some reason, or are way over-priced. The new quality listings are seemingly few and far between, and are gobbled up right away in some ridiculous bidding wars – there was a listing in the west-end last month that had over 40 competing offers! However, I do believe that this particular listing may have been irresponsibly under-priced, and it was also an amazing coincidence that the listing agent also represented the buyer who ended up having the best offer – what are the chances?!
So, in what is by every definition a “seller’s market”, why are we not seeing more signs on lawns trying to take advantage? Well, generally speaking there are two types of sellers – those looking to buy bigger, more expensive houses and those looking to downsize or get out of the market altogether. The first group is not selling right now simply because there are so few bigger, better houses for them to buy and move to after they sell. The last thing that most people want to do is have to settle for a home they don’t like – or have no place at all to live because you’ve sold and now can’t find your next house! It follows that there are so few of these type of properties to move “up” to coming on the market because the latter group – mostly baby-boomers at, or nearing retirement age are holding off from selling as well. It’s my best guess that this group is hesitant to sell because of the current economic conditions that are making life very difficult for “savers”. The combination of record low interest rates and the ever-present uncertainty in global capital markets is making it incredibly difficult to find a risk-averse investments where one could see any real income or growth. I believe that this group is choosing to keep their hard earned equity in their homes because they perceive real estate as a relatively safe investment. It is this lack of movement at the top end of the market that has created a shortage of inventory all the way down. The buyers are still out there in full force, unfortunately there’s nothing they can do without any willing sellers.
Ask anyone trying to buy in Toronto right now – it’s difficult waiting and competing for the right place, but it’s definitely a good time to get into the market due to the incredible mortgage rates available (Variable rate mortgages are no longer discounted the way they had been, but fixed rate mortgages have never been lower). I definitely appreciate the fact that many believe that real estate is entirely overvalued right now (I happen to disagree), and we may see a small retraction in prices at some point – every market goes through cycles. The point I like to make is that if one has a long term outlook and plans on owning real estate in one form or another for the next 30, 40 or 50 years, it doesn’t really matter if the value of your home fluctuates next year or the year after. We buy our homes because we need and want a place to call our own, and one of the benefits of living in Toronto is the fact that in the long run you will have a highly appreciable asset.