A question we’re frequently hearing from our buyers this Spring is: “Where are the decent listings?” To complicate matters, when our buyers do find a potential property, they realize that in order to secure the property in question, they often must become participants in a frenzied bidding war.
Recently one of our clients fought hard with their chequebook to win a downtown east-side house in competition. Even though they offered ten percent over asking without any conditions, and included some additional Seller-friendly provisions, they still lost out. This scenario in the current market is becoming typical, with a dwindling supply of quality stock presenting itself. So – why is there a distinct lack of good product coming to market?
Here are our three primary reasons:
1) House Flipping has dramatically diminished The costs associated with buying, renovating and selling a house for profit, combined with the fear that the market might change at any moment, has prompted a lot of renovators and ‘do-it-yourselfers’ to withdraw from the market. With slimmer profit margins and a perceived greater risk, we’re just not seeing as many house flips as in the past. While we don’t favour crappy renovation resales for our clients, if there are less of those properties for people other than our Purchasers to buy, it means greater competition for the product our clients want.
2) Children are expensive Recently three separate sets of clients have been lamenting how horrifically expensive their child care costs are in the City of Toronto. Clients with children under five years of age who would otherwise be ready to move up the property ladder into larger dwellings are delaying such a move. They’re telling me that once their kids are in school, they’ll have another $1200+ per month to allocate to a bigger mortgage. However, until that time arrives, they’re cash strapped and unable to upgrade into larger digs. Our intuition says, with the urban centre experiencing a baby explosion, this is trending.
3) Moving house is costly Many of our clients who have owned their properties for two to seven years are discovering that even though they may have bigger incomes and a decent amount of equity in their property, the cost to sell and buy is becoming increasingly prohibitive. In particular, the double land-transfer taxes for property in the City of Toronto are prompting homeowners to reconsider a move. Instead of incurring $50,000 to $75,000 in expenses to sell and buy, homeowners are increasingly shifting their attention to enlarging their current homes. Instead of upgrading to the coveted four or five bedroom downtown property (with a sticker price often $200,000 more than a three bedroom dwelling), they’re electing to add more space on to their existing residence (the main floor family room with master bedroom + ensuite above is going to be increasingly common in city housing).
So what does this mean to the market?
A robust housing economy requires a sufficient supply of available property in all segments of the market to be traded. This necessary filtering of housing stock allows existing property owners to move up and down the property ladder with ease. If even one segment of the market tightens (at the moment it is centrally-located freehold housing stock priced between $500,000 and $900,000), then the other market segments are restricted from upgrading or scaling down. More disconcerting is the situation that is created when less and less product comes to market during a time when demand is sky-rocketing. This pushes prices up dramatically, effectively widening the gap between each market segments and contributes to an even greater imbalance. If the middle segments of the freehold market continue to contract in supply, anticipate seeing buyers who’d like to leap from their condominiums into downtown starter homes face a cost-disparity so large they’ll have to choose to either remain in the downtown condominium market or relocate to the more affordable suburbs.
So will the supply continue to shrink while demand grows? For houses… Yes! For condos… No!
Toronto is one of the centres across the country that is experiencing unprecedented growth in condominium development. While demand currently continues to surge for this particular housing type, driven by a variety of factors, including an uptick in Baby Boomers heading back into urban centres for retirement living, as well as an increase of property investors, as we have said in the past, if any cracks are to appear in the veneer of the Toronto housing market, they might very well reside in the condo market. For right now though, supply and demand in this niche is continuing fuel activity, as well as place upward pressure on prices.
No matter what part of the market you are hoping to access, urbaneer.com has a finger on the collective pulse Toronto housing. This results in the ability to reassure and guide home buyers and sellers as they try to navigate the current market conditions, as well as the emotional highs and lows that inevitably come along for the ride. With a multi-disciplinary education in housing, over twenty years of real estate sales, and a deep understanding of the mechanics of the market, please know we’re here to help! If you need assistance, insights, or guidance manoeuvring market realities as they pertain to you, log on to urbaneer.com to learn more about us!
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Steven Fudge, Sales Representative
& The Urbaneer Team
Bosley Real Estate Ltd., Brokerage • (416) 322-8000
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