Patrick talks frankly about supply and demand pushing prices over $1 million for a house in the city of Toronto and the influence of foreign money increasing prices.
Transcript from Interview:
Jeffrey: I’m here with Patrick Rocca who’s with Bosley Real Estate here in Toronto, and I know we’ve had Patrick on a few times in the past but this time, I think we’ll hear some really interesting things from him about the recent market in the central part of Toronto. Patrick, I was wondering if you could tell everyone a little bit more about you and what you do at Bosley.
Patrick: Sure. Good morning, Jeffrey. Patrick Rocca, obviously, with Bosley Real Estate here in the Davisville area. I’m the top agent with Bosley, one of the top agents in the city, and my primary area is the Davisville, Leaside market, and it’s the area where I work and where I live.
Jeffrey: And I know you’ve been in the real estate game for many, many years. It seems like every second person I talk to wants to know what’s going on with the market, and we’re hearing a lot of reports about are we in a bubble? Are we not in a bubble? Is there another source of income and capital coming to the market? So I wonder if you could talk top line about what you’re seeing in the market.
Patrick: Yeah. I have 25 years in this business and I have to say that the first six months of this year has amazed me. I have not quite seen anything like this. We’ve been in a great market. As you know, we’ve had many discussions over the past few years and it’s been great. We’ve had sizable gains, you know, going back a couple of years. This year, it’s almost off the charts. And when I say “off the charts,” we’re seeing prices that just blow your mind. Bungalows are now selling anywhere from, you know, $1.4 to $1.5. I sold one for over $1.5 a couple of weeks ago and that’s unprecedented. They were selling for $1.1, $1.2 last year. Properties that were listed and selling for $1.2 in the fall, late fall of last year, selling $1.5, $1.6 now. Semi-detached, they’re selling for a $1.2 million, $1.3 million. So you’re seeing a complete shift across the board at least $200,000 to $300,000, it doesn’t matter what the property is, semi-bungalow, detached, two-story. It’s very, very hot right now. Anything between $800,000 and $2 million, pretty much always gets multiple offers and sells significantly over. Where you start to see a little bit of a, not softening, but a little bit where the houses do sit for a bit longer is sort of in that $2.5, $2.4 plus range. It’s been crazy. I mean, honestly, I just…the market’s changing and I was quoted this in The Global Mail a couple of weeks back. The market’s changing weekly, like, not quarterly or not monthly. It’s like every week, there’s a new stupid, for lack of a better word. And there was one last night. I mean, it was listed for, you know, $949 in Leaside, Mutual Drive, you know, a train wreck. It needs to be torn down, on a busy, busy street. It sold for $1.405 million.
Jeffrey: It sounds like there’s a situation where there’s often multiple offers, that’s something which is not unusual in this market we’ve seen for the past number of years. But I’ve heard from some of the clients that we’ve been working with, is that there does seem to be an inflow of money from somewhere else. I wonder if you could talk about that. Have you seen any inflows of capital from other areas?
Patrick: Yeah, absolutely. That’s, honestly, that is the driving force behind these big gains this year. I mean, it’s not uncommon, as you said, to have multiple offers. I mean, what’s been driving our market in the past couple of years is the lack of supply, you know, the big demand and the low rates. Now, you throw in foreign money, which…there’s always been foreign money but this year, it seems to be significant, Asian, Persian. If I have 10 offers on a property, 6 or 7 of them are foreign money. And you’re seeing it across the board. And that seems to be what’s really, really spiking these prices. I mean, we’re always gonna have multiple offers. We’re always gonna have over asking, but what’s happening is that these foreign people are coming in and they’re paying crazy prices.
And I have a very good client of mine who’s foreign but very Canadian, very educated and I asked him. I said, “Why are your people paying these prices?” And he was like, “Well, we just gotta get our…” They wanna get their money out of, you know, China, and they wanna get their money out of Iran because they could lose everything. So they don’t care what they pay here as long as they have something. So they’re…you know, they’re, on one hand, they’re getting misguided by their realtor. But on the other hand, the sellers who are selling their properties are in for a big windfall, right? It’s scary. It’s actually a bit frightening.
I mean, I think when I look at it, it’s great for sellers. You know, it’s great for me, I mean, but quite frankly, I’ll sell regardless of whether the foreign buyer is there or not because I work my area and I dominate my area, so even if the foreign buyers went away, I still sell. But what concerns me is for someone like my children who are 20 and 18, they’re not gonna be able to afford to live in the city anymore. You cannot buy anything. And I’m not just talking Leaside, Davisville. I’m talking about Park, Flemingdon, Rosedale. I mean, you can’t get anything even for $1,000,000. It’s impossible.
Jeffrey: Yeah. And that’s a lot of what I’ve been hearing from clients. I had a meeting with some clients earlier who bought in the Davisville area about six, seven years ago, and they were intending to go and move up to a larger home. They’re in, currently, a two-bedroom bungalow. And they thought that it would be fairly straightforward to go and look in Leaside, Davisville, surrounding areas but they just weren’t able to find anything that they found was of value and, you know, coming from a home that they’re in which is nicely finished but a bungalow, and still needing new space. They realized if they pay $1.6, $1.7, they’d still have to put $200,000 to $250,000 into the home to actually make it the way they wanted to. So they’re seriously rethinking their options to stay in the current house, do some renovations, and really make it a long-term investment for them.
Patrick: Yeah. I’m seeing people do that as well because they can’t make that next step, and that’s the problem as well.
Jeffrey: Yeah. And I agree for the next generation, it’s definitely a concern. I know even folks that are coming out of university now, they’ve got some student debt, but yet to get into the market like you said, even at $1 million, you’ve still got to come up with a significant down payment. And the payments themselves, sometimes, are up to 50% of someone’s income, so that is a very different atmosphere than we were in even five years ago.
Patrick: Yeah. Yeah. No, it’s scary. And you wanna know something, it’s not real…I mean, honestly, it’s not just central Toronto driven. I mean, I’m hearing stories…I mean, we had a listing in our office out in Ajax about a month ago and it had nine offers. You know, I sold one, believe it or not, definitely not my area, but they were clients who’d moved from Leaside, who wanted to move back. And it sold for $60,000 over asking, one offer. So I mean, it’s starting to trickle out into other areas as well. I mean, Markham I hear is just crazy in Richmond Hill. I have clients from Leaside and Davisville who wanna move to Markham and they can’t. They’re getting in out bid in there, getting in bidding wars all the time.
Jeffrey: Yeah, it seems to be a little bit uncharted territory and the more people I talk to, the more differing opinions I get on how it’s actually gonna end. Some people are saying, yes, it’s a bubble and you know, if something happens in the market, then people could see 10% to 15% decrease in values. But I’ve heard from other people who say that there could be a different outcome. And it just depends on demand and stability. Some of these are even global factors which we’re seeing. You know, like you said, the outflow of money from other jurisdictions. So your guess is as good as mine as to where this is going to be in about a year.
Patrick: Yeah. Yeah, I hate that D-word. I know, honestly, you know, and I’m not the eternal optimist but I think that at some point, we’re gonna have a bit of a slow down but I just don’t see a crash. I mean, honestly, when you’ve got no supply and you’ve still got significant demand, even if you take the foreign money out of the equation, you still got people that wanna buy. So I think you’re gonna need…I mean, if the government wants to slow this market down, which is what they’re talking about doing, I think the thing to do is to tax foreign buyers, you know, a significant tax. I mean, tax them for something that…not to dissuade them from buying but something that would be significant because I think that would slow it down a bit. But the only other way I see it slowing down is if you get a huge influx of supply, a spike in rates. And I think they have to happen simultaneously. And I don’t see that happening.
Jeffrey: Yeah, yeah. I don’t see that on the horizon. And even with the amount of condos that are coming into the market, people are finding that still, that supply is getting taken up just because there’s a lot of interest in the city. Final question, a lot of people talk about Toronto now being a world-class city akin to New York, Paris, London. And you know, for many, many years, those cities have not had a real affordability in terms of purchasing, so people rent and people buy condos that are quite expensive, and that’s sort of the new reality in those cities. It’s been the reality for a number of years. Do you see that as a new reality for the city of Toronto?
Patrick: I’m starting to see more people renting now. I’m starting to see more people buy condos because, I mean, that’s what’s fueling the condo market is the affordability issue. I mean, you know, people can’t afford $1 million, $1.5 million houses so they’re buying $500,000 condos or $600,000 condos. So yeah, I see that…you know, that’s been actually going on for probably a couple of years. But yeah, the rental side, I’m seeing a lot of my clients actually getting out and renting now.
Jeffrey: Yeah. And I know that some folks that I’ve talked to were trying to time the market. They sold their property, got into a rental, wanted to buy back in later when the market cooled down. I think that’s risky business, you know, you never can time the market.
Patrick: Yeah, that’s…I always say to my clients, you can’t time the market. And I think even in…more so in this market, you just can’t do that. I mean, there’s no such thing as timing the market.
Jeffrey: Agreed. So interesting times, as always, a lot of fantastic insights, Patrick. I really appreciate your time and we’ll touch base in the future and we’ll see where we are, maybe towards the end of the year.