- Sep 6, 2007
- Reaction score
Cold outside, but no chill in sales
Agents lament shortage of product
From Thursday's Globe and Mail
January 25, 2008 at 12:00 AM EST
With world stock markets roiling this week, many investors are looking at their homes as a safe haven in more ways than one.
"We've had a really quick start to January," says real estate agent Rochelle DeClute of Re/Max Hallmark Realty Ltd.
This week, an agent on the DeClute team was representing a client in the escalating bidding war for a house listed for $399,000 just north of the Beaches neighbourhood. The sellers were inundated with 16 offers, including the winning bid of $481,600.
Despite losing out on the house, the client was satisfied with the outcome — he wouldn't have paid any more, says Ms. DeClute.
According to the Toronto Real Estate Board, the number of houses changing hands in the first half of January jumped 11 per cent from the same period of a year earlier. The average price increased 8 per cent to $367,574 from $340,793 at mid-January last year.
More signs point to a robust spring market ahead: Bidding wars are common, buyers are outnumbering sellers, and this week the Bank of Canada lowered a key lending rate by one-quarter point.
Economists are predicting more cuts.
Ms. DeClute says some potential buyers are feeling more buoyant about the real estate market the more they look at the carnage in financial markets.
"People are feeling that's where they'd rather have their money."
Some buyers may be rushing to close transactions before the city's new land transfer tax comes into effect.
As of Feb. 1, Toronto home buyers will pay a new fee to the city in addition to the existing provincial land transfer tax.
It will nearly double the tax bill for home buyers, raising the tab on a $375,000 home to $7,575 from $4,100.
Chestnut Park Real Estate broker Peter Russell says agents are struggling with a dearth of houses on the market.
"There's less to buy. It's hard to take the temperature of the market when you haven't got enough product."
Mr. Russell says he knows of potential buyers out there who are anxious to see new houses arrive on the market.
"I've seen this, year in and year out, for the past 30 years — people want to wait until the tulips come up," he says of the sellers.
But Mr. Russell believes that when eager buyers abound, sellers should take advantage of the lack of competition.
"Prudent vendors will forgo the tulips."
The real estate market maintained a torrid pace in 2007: Across Canada, resale house prices set a record last year with a 20 per cent increase over 2006.
House prices, which rose 10.8 per cent in 2007 from 2006, are expected to go up at a more modest rate in 2008, according to the Canadian Real Estate Association.
At Toronto-Dominion Bank, economist Beata Caranci says there is little concern that the Canadian housing market will start to mirror the slump in the United States. Still, she expects the central bank to cut rates by a more aggressive 50 basis points at its next scheduled meeting on March 4th and possibly another 25 basis points when it meets on April 22nd.
In an economic commentary, she predicts that national house prices will rise 5 to 7 per cent in 2008, compared with a U.S. market that will likely absorb losses of 5 per cent or more.
"Given the degree of economic uncertainty on both sides of the border, the extent of additional easing will be highly dependent on how developments in the U.S. unfold and whether financial market confidence remains in question," she cautions.
TREB figures show that the average time on market so far in 2008 has fallen 13 per cent from this time last year. TREB estimates that the average time on market is 41 days, but Ms. Rochelle points out that hot neighbourhoods see houses disappear much more quickly.
In the Beaches neighbourhood, where the DeClute team specializes, the agent says she would be shocked if a house ever lasted as long as 41 days.
"If a house is priced right we expect to see it move in the first couple of weeks."
While Mr. Russell notes that multiple offers are still common, some buyers are fed up.
"Some say, 'Call me after the tender hour — I'm not going to participate in that rubbish any more.'"
Like most in the real estate industry, Mr. Russell expects to see less dramatic price increases in Toronto this year.
"Nothing goes up … forever."
An exception could be the centre core of Toronto, he says, where buyers always seem to outnumber sellers.
"The people who can afford it continue to want to live there — that underpins value. I don't see the centre of our city doing anything but carrying on."
Mr. Russell believes that lower interest rates help to keep houses affordable and therefore an easing of monetary policy bolsters demand.
The land transfer tax caused a flurry of buying in December but Mr. Russell says it could cause a chill at the lower-priced end of the market.
"It's too early to say whether it will be absorbed at that level or not."