Toronto housing market a battlefield - and cash is the weapon

Globeandmail.com
March 6, 2013
By Carolyn Ireland

Manning Avenue in central Toronto has been the epicentre of a recent outbreak of house hunting exuberance.

The street seems to have a supply of the most sought-after of commodities: Houses with an asking price well below $1-million. That gives buyers hope that, when all the dust has settled, they’ll have a dwelling or building site for not much more than $1-million.

A semi-detached on Manning south of Bloor Street, listed at $649,000, sold for $908,888. The multiunit property “in need of renovations,” according to the listing, included three stoves and three refrigerators in “as is” condition. Agents across the city were talking about the 32 offers on the table that afternoon.

“It’s not stopped,” says real estate agent Graham Connaughton of Sotheby’s International Realty Canada. “I think every agent in the city is bemoaning the lack of listings.”

Two days later, a renovated Victorian on Manning near Harbord with an asking price of $849,000 sold for more than $1-million.

Less than a week later, the Little Italy stretch of Manning was the centre of the hubbub again when a listing that began with “attention: renovators, investors, handymen”, and established an asking price of $749,900, sold for $1.035-million.

Of course Manning is not the only street with frenzied buyers vying to live there: a few streets east on Markham, a three-storey semi-detached home sold for $1.471-million, or nine per cent above its asking price of $1.35-million. The action is emblematic of what’s happening throughout the core: Mr. Connaughton says Little Italy is one of the downtown neighbourhoods – along with Beaconsfield, Trinity-Bellwoods, Bickford Park and King Street West to name a few – drawing empty nesters from the suburbs.

“They put on their black T-shirts and black sunglasses and go to the clubs they used to go to years ago.”

Condos and infill townhouses are also drawing new buyers. A townhouse development at College and Ossington called Block is one of the new projects appeals to that demographic, he adds.

“Little Italy has a lot happening,” says Mr. Connaughton.

Condos have also been selling at a healthy rate in the resale market, says the agent, who calls the activity “balanced.”

He points to a Sotheby’s listing for a 1,500-square-foot condo near High Park with an asking price of more than $1-million. It received only one offer – at above the asking price.

The buyers were a downsizing couple, Mr. Connaughton says. He figures they wanted to be sure they could secure a deal and they couldn’t be certain a rival bid wouldn’t materialize. Still, the exodus of baby boomers from their houses has not been as dramatic as some forecasters have been predicting. The fact that many seniors want to stay in their houses is one reason listings are so scarce, Mr. Connaughton reckons. He notes that on his own street in the west end, two houses recently came on the market after elderly residents moved on.

“They stayed well into their 90s,” he says.

Mark Savel, an agent with Sage Real Estate Ltd., took his clients to see one of the houses that caused such agitation on Manning. The couple had set a budget of between $650,000 and $900,00 for a house between Dufferin Street and Bayview Avenue, says the agent. The house with the asking price of $849,000 held a lot of appeal. But as the offer date approached, it was clear a swarm was forming.

“When they saw the high number of offers we didn’t go forward,” says Mr. Savel. “They decided to pass on it all together.”

The agent says his clients had already participated in four bidding contests in three months. That kind of competition takes a toll on buyers’ emotions, he adds.

The couple decided on a new battle plan and started looking at condos instead.

That tactic worked out well, says Mr. Savel, when the couple made a bully offer on a townhouse condo in the St. Lawrence Market area. An offer date was set for the two-bedroom unit but the clients put an offer on the table ahead of schedule. “We just jumped on it,” says Mr. Savel.

The sellers accepted the bully offer and the clients are delighted, says the agent. They paid about $300,000 less than they would have spent for a house and they love the neighbourhood, he adds. They figure the area still has room to appreciate in value whereas Manning Avenue is already established.

Mr. Savel says that the lack of listings in centrally located single-family dwellings may start to ease with the spring thaw. He has two sets of sellers who are fully committed to listing their houses in the spring, he says.

Many would-be sellers are stymied by the problem of finding another property, but Mr. Savel says these clients plan to move up to the price range above $1-million, where the competition is less intense. Because the Canada Mortgage and Housing Corp. requires a 20 per cent-or-higher down payment on houses valued at more than $1-million, only people with $200,000 or more can move into that segment.

Mr. Savel knows of quite a few move-up buyers who are planning to employ the same strategy.

“Maybe the $1.5-million range will be just as competitive. It’s going to be interesting to see what happens in the spring.”

Some potential buyers who are priced out of central Toronto are heading to the suburbs.

Real estate agent Carl Minicucci of Humber Valley Real Estate Inc. says he has worked with lots of people heading north and west of Toronto to communities in Vaughan because they are priced out of the core. Anticipation of the completed Toronto Transit Commission’s subway extension is generating lots of excitement, says Mr. Minicucci.

“The impact of the new subway cannot be overstated.”

Many parents are delving into Fraser Institute rankings to find schools for their children. They also favour schools with French language immersion programs.

“That’s becoming much more of a prominent issue,” he says.

Mr. Minicucci says schools in Vaughan have improved their enrichment programs and more are offering French in both the public and separate school systems. “Enrolment has virtually doubled in the past couple of years,” he says of one school that offers French immersion.

Within Vaughan, the mix of listings is also shifting. Communities such as Maple, Patterson and Vellore Village have seen listings shrink since the end of 2012. That means sales have also dropped but prices have been buoyed by the increased competition.

Listings in Kleinburg and Islington Woods have surged compared with December, 2012.

Mr. Minicucci says it’s too early to know why that trend has emerged but he believes new housing subdivisions and changes to mortgage rules play a part.