Is the Real Estate Market In Toronto Changing?

For those who haven’t kept up with the headlines, the Real Estate Market In Toronto has been changing on an almost weekly basis, with rising prices and diminishing supply common for the past several years. In this interview, Patrick Rocca of Bosley Real Estate in North Toronto shares his observations and tips for both buyers and sellers eager to understand where the market is going.
 

Transcript from Interview:
 

Jeff: 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’d like to talk with him a little bit about the market and recent developments. So Patrick, I wonder if you could introduce yourself and tell everyone a little bit more about you and Bosley.

Patrick: Sure. Thanks, Jeff. I appreciate the opportunity. Patrick Rocca, obviously, with Bosley Real Estate here in Davisville Village at Leaside. I’m a top agent in the area, specializing in Leaside and Davisville Village. It’s a great community.

Jeff: Fantastic. And I was just looking over the last couple of times we’ve had you on, and always the same question seems to come up is rising prices, diminishing supply, are we in a bubble? And where is the market gonna go from here? And since we chatted last, just under a year ago, we’ve noticed steep increases in house prices, not only in North Toronto, but in the rest of the greater Toronto area. And that’s spurred the provincial government to step in with some recommendations and some new legislation. So I wonder if you could just talk a little about the year that’s passed and some of the things that you’ve experienced.

Patrick: Sure, yeah. I could probably talk for hours about this. I’ll try and keep it brief. We have had, as you know and as we’ve discussed in the past, significant increases in prices over the last few years. Most notably, in the last 120 days this year, in the new year, we’ve had, specifically in the central core, properties that were selling in the fall are selling now for $300,000, $400,000, more in a matter of months. There’s talk about this 30% increase year over year. It’s actually in the first four months of this year that I’ve noticed the spike has been tremendous. And, you know, what has caused that? Well, it’s the same old supply versus demand. There is no supply. We actually have less supply now than I think we’ve ever had.

The demand is even greater now. Rates are low, and it’s been crazy on fire. You’re right, the government, in their infinite wisdom, decided that they want to try and step in and curb things. Believe it or not, even before they did, the market started changing. And when I say changing, I noticed about three, four weeks ago when the liberals came out, specifically federally and provincially federally based, they talked about a capital gains tax, and they thankfully didn’t implement anything there. Provincially, they talked about their plan that they were gonna implement, and they’ve done that, they made the announcement, I guess 10 days ago, and they actually tabled it in the budget last week.

So what happened about three, four weeks ago was that when the rumors started getting out that these things were gonna happen, the market actually started to calm down a bit. I noticed it in activity, on my showings, and my listings, and activity in terms of offers. You know, instead of getting five, six, seven, eight offers, you’re now getting two or three, you know, maybe one. I had one last evening where we only got one offer, and a month ago, that would have had four or five. So I think it’s a combination of things, I think they’ve targeted the foreign market, there’s no doubt about that, and that has had a big impact on our market. And I think that a lot of buyers, you know, believe it or not…I mean, normally, we see buyers get fatigued later in the year. I think buyers are just fatigued now, and they’re taking a break, and they wanna see what happens with these rules that have come into place.

So, I mean, that’s my take on it. Quite frankly, I think what the Liberals did…I don’t really think it was aimed at anything specifically. I mean, yeah, the foreign market. I think where it’s going to hurt is obviously the condo market, I’ve seen that myself personally. I had a condo listing that would have sold in two days a month ago, and it took me almost 10 days. And we got under asking, because the foreign market is huge, investor market is huge in the condo market. So, I mean, you know, obviously, if you’re putting rent controls in and you are doing all these sort of things, investors shy away from that type of thing. So, you know, I think that that’s where there’s gonna be a huge impact. But we are seeing it in the single housing as well, but it’s more spotty. Like if you had 100 homes last month, all 100 would sell and crazy over asking. Now you get 100 homes, 75 sell and 25 are wonky. They maybe take a while to sell, or they don’t get the amount of offers that they used to get. And buyers…or sorry, sellers are digging in now too. I mean, sellers haven’t realized… and it happened to me last evening, the sellers don’t realize that the market has shifted, and the expectation can’t be as great as it was four weeks ago.

So what we’re seeing now is a lot of sellers aren’t getting their number on offer night, and they’re actually taking the house off the market and relisting it at a higher price, which I don’t agree with, but we’re seeing that. So it’s interesting times in the marketplace, basically.

Jeff: Yeah, definitely. I do see that, even in terms of the supply in this neighborhood, which is Davisville in North Toronto. I was out for a walk last night, and really, I saw one house with a “For sale” sign and several with a “Coming soon” sign, which, you know, I know that a lot of people priming the market with that. But definitely, you know, we have not seen the amount of supply in this neighborhood, and I know that prices are still creeping up year on year. So if you’re, for instance, a buyer, you’re trying to get into an established neighborhood, either North Toronto or other areas across the city, what would your advice be for those buyers?

Patrick: Well, I mean, it might be a good time right now to buy. I mean, because obviously, there’s less supply. But believe it or not, in the last couple of weeks, there has been more supply. Like, I’ve listed two this week, and I listed a couple last week, and stuff is starting to roll out now, as it normally does in May. So I think there’s an opportunity for buyers, provided that sellers readjust their expectations. Because if you get…you know, you can have a buyer that instead of having 10 offers, there’s only two or three offers. But then the seller digs in their heels and says, “I’m not taking any of these offers, I’m increasing my price.” So it’s a bit of a quagmire right now. And it’s been very, very, very interesting times and just weird stuff happening.

Jeff: Yeah, and I think you’re right. The mismatch in the market is something which, you know, I’ve seen a couple times before where sellers don’t get their price. Or, you know, a lot of people are going for multiple offers, so they’ll list rather low. And a property on our street was actually listed, I would say $600,000 or $700,000 under market in order to attract multiple offers so that they could at least say, “Yeah, it sold for over asking.” And I’m not sure if that’s going to be effective long term, as effective as we’ve seen in the past. Are you seeing changes, as you mentioned, in the multiple offer scenarios?

Patrick: Oh, absolutely. Like I said earlier, and previously, we’re seeing…I mean, like last night, I had a listing that a month ago would have been a slam dunk with several offers. I had one offer last night, and it was conditional. I mean, you never saw conditional offers a month ago, my sellers never took it. You know, and I really didn’t want them to take a conditional offer, because it was a weird clause. But yeah, the number of offers are down. But then again, I mean, there was a house last night that sold for $400,000 over asking in Davisville, and there was another one the other night that sold for, I mean, $300,000, $400,000 over asking. And I sold two last week, both for $300,000 over asking. So the prices haven’t dropped, and I don’t see them coming down.

What I’m seeing is less offers and price stability. I mean, so I don’t think you’re gonna see these runaway prices. Like, honestly, pricing of property two months ago, it changed every week. I mean, if I told someone a price, you know, in the first week of February, by the second week of February, it had increased. By the third week in February, it had increased. You know, so it was increasing weekly. Now we’re not seeing those crazy increases, but we’re still seeing stability. So I don’t see a price drop, and I don’t see the runaway prices that we’ve seen either. And I think that, you know, that will continue. But like I said, it’s an interesting time, because sellers really now have to readjust their expectations.

Jeff: Yeah. And like you said, because sellers have to readjust, it’s almost incumbent on them to get great advice for how they wanna price. You know, where like three weeks ago, you could have put your house on almost any price, and you would have got multiples, and it was almost ready for the slam dunk. Now I think you do need a little bit more strategy when you’re pricing and, you know, what you’re gonna accept for an offer.

Patrick: Absolutely, knowing you have to be realistic, and you’re right, the advice is a key factor when you’re pricing something. Now you’ve gotta be very careful, and you’ve gotta be very direct, and you can’t promise the moon, because you just don’t know. I mean, you know, six weeks ago, we didn’t know what we were gonna get, because prices were so crazy. You could list something for 1.8 and get 2.6, and it was crazy. Now, it’s crazy the other way, you could list at 1.8, you could get 1.8. Or you could get 2.2, right? So, I mean, yeah, pricing strategy and advising clients is very, very, very critical, especially now.

Jeff: Yeah, and I know you’ve had over 25 years in the market, and we’ve talked about this a couple of times. And I even bumped into a contractor working in the neighborhood, and he said he’s noticing that people are not choosing to move, they’re choosing to do renovations, improve their properties just because they say, “You know, I can move, but I’ll have to spend $200,000, $300,000 on the place I’m moving into. So why don’t I invest that in my current property, keep my existing mortgage payment, and at least I know what I’m getting.” Is that something you’re seeing with clients as well?

Patrick: Yeah, I’m seeing that, and that’s actually been a trend for actually, I wouldn’t say a year, but yeah, I started noticing it late last year. I mean, because number one, prices have gotten so crazy, yeah, sometimes it doesn’t make sense to move. Well, with buying and selling too. I mean, if you’re buying, you got land transfer tax, if you’re selling, you’ve got commissions and all the other things that factor into it. So, I mean, to make a move, you know, right out the gate, I mean, with costs involved in buying and selling, you could be $150,000 without even considering what you have to buy, right?

Jeff:  So it does make sense to really consider what you really want, what your needs are, and if moving is going to get that for you. Now, finally, there’s been a lot of talk in the news over the past three, four months about Toronto becoming a world-class city and all what that involves, likely, you know, compared to New York, London, where people can’t necessarily expect they’re going to be able to buy a single family home or a detached home in the city in their lifetime. And folks are really having difficulty coming to grips with that. Is that something that you actually see as a natural evolution from where we are now?

Patrick: I would have to say, unfortunately, yes. And I think Toronto’s a world class city regardless, you know, it’s been a world class city, you know, before this year. But the reality is that, you know, I have a son in third year at Queens and a daughter, first year at Western, and I don’t know how the heck they’re gonna be able to afford to live in the city, because affordability is a huge, huge factor. And you’re right, I mean, prices have increased so substantially that, you know, the next wave of buyers, they’re in tough.

Jeff: Yeah, and I don’t see anything on the horizon, especially, even with rates so low, you know, if rates tick up one or 2%, that’ll just make it even more of a challenge to actually afford a house. So I do see people thinking about different scenarios, multiple families sharing a house, that sort of thing. I think people will become very creative, but I also think that people are going to start to accept, maybe, raising families in condos and taking advantage of a lot of the amenities of the city as well as, you know, being able to be more comfortable in smaller spaces.

Patrick: Yep. No, you’re 100% right. I would agree with that assessment.

Jeff: Fantastic. Well Patrick, always interesting, always a pleasure to talk and get your sense of the markets. I look forward to our next chat, and we’ll see what’s happened in the intervening time when we talk next.

Patrick: Excellent. Thank you very much, Jeff. Appreciate it.