Toronto Real Estate Market Update: January 2017
Author: Tracy Ruddell
January kicked off the New Year with red hot Real Estate prices. Houses for sale in Toronto were few and far between but therein lies the biggest issue in Toronto Real Estate: supply. Or rather, demand in the face of tight supply.
Let’s take a look at how the latest sales results break down and what it means for buyers and sellers as we move through 2017.
Winter is when the Real Estate market tends to slow down, right? When you add a particularly low listings month to an already epic supply issue, however, prices skyrocket. +22.3% on average across the GTA, year-over-year, to be exact.
New listings, particularly of freehold Toronto homes, are so low in the face of rising demand that the bidding wars we’ve seen for years have become even more insane. Instead of 10 to 15 bidders on a detached home near the subway or streetcar, 20 to 30 has become the norm. While not unseen in recent years by any stretch, anyone in the industry will tell you there's been a palpable shift in the market over the last six months with unprecedented activity on offer nights and abnormal buyer & seller behaviours that are hard to predict, such as aggressive bully offers in the first hour of list.
This has also opened the door for shady tactics like double-ending deals that consumers need to be aware of. This is why it's more important than ever to do your homework and hire an expert REALTOR® who is ethical and has your back. Don't just sign with the listings agent you meet at an Open House or whomever last dropped a postcard in your mailbox. Do your homework.
Check out January's figures by area and property type, above. It's unusual to see such as tight race when it comes to value appreciation with detached, semi-detached and townhomes in both Toronto and the 905 all going up around +26 to 28% in price on average, year-over-year.
Even condos are seeing double digit annual price growth. I remember when we thought +7 to 8% average, annual appreciation was hot for Toronto condos. Now, expect the trends of offer hold backs, fierce bidding wars and final sales prices well above list to carry over to condominiums; they're not just freehold phenomena.
While the number of property sales in January 2017 was up, it's condos fueling that sales growth; we actually had a decrease in both new and active listings over same period last year. It's a trend that Toronto REALTORS®, along with the Toronto Real Estate Board (TREB), fear will continue throughout the year.
“The number of active listings on TREB’s MLS® System at the end of January was essentially half of what was reported as available at the same time last year. That statistic, on its own, tells us that there is a serious supply problem in the GTA – a problem that will continue to play itself out in 2017. The result will be very strong price growth for all home types again this year,” said Jason Mercer, TREB’s Director of Market Analysis.
Consequently, January’s sale prices were like nothing we’ve ever seen for the start of a New Year.
What concerns us most, however, isn't the staggering decline of active listings, signalling just how fast properties are selling. It is concerning for buyers and their REALTORs®, of course it is, but it's a trend we've been experiencing for months and so there's not a whole lot of new information looking at that stat in isolation.
What's crazy is the drop in new listings. January 2017 saw -17.6% fewer new listings than January 2016, illustrated above. We saw a similar downward trajectory in December with new listings falling -11.7% below the same month, year prior. This could be a signal of an even tighter market in 2017 and it's not difficult to predict what that's going to mean for prices. Just take a look at 2016's incredible price growth, illustrated below, and think about the potential impact of even fewer listings in 2017.
So, what does this all mean for buyers and sellers?
There are still agents out there advising clients to wait until spring to sell with April or May traditionally being the best months to maximize you’re sales price. The truth is, there is no “best time” anymore. The old, seasonal rules of Real Estate no longer apply.
Whereas the best time to buy is now (as prices are continually rising, faster than most buyers can earn/save), the best time to sell is when it works best, logistically, for you as a seller. Unless you have a home that shows exceedingly better in the spring (for example, if you have a stellar garden that’s one of your home’s top selling features), if you want to list in February, list in February.
If you’re thinking of selling now, it’s true that you’ll likely make more money by waiting until spring but not because of the old seasonal cycles, rather because prices are rising at such a fast pace that a few extra months could mean another 5% in some areas. However, if you’re buying in the same market, it’s largely relative and you’ll just be paying it on the other end. We used to advise waiting as a smart tactic for those moving out of a prime area into an up-and-coming one or for down-sizers but, again, those old rules don't mean what they used to. "Prime", for example, has become just about any neighbourhood close to downtown.
There’s also something to be said for listing during the winter when there’s such a heavy listings shortage. Buyers haven’t hibernated this January as they have in previous years and we expect sales prices in February and March to be even stronger.
If you’re a buyer just entering the GTA Real Estate market, there are some really big pills to swallow but the sooner you come to terms with the realities of the market, the better your chances of finding a home (without losing your sanity).
The first reality is that the longer you wait to buy, the harder it's going to get. The second point we want to make is that almost every property is going to have an offer date and you need to understand how this impacts buyer, seller and agent behaviour. It's true that holding for offers on a set night (typically 6-10 days after list) has been a feature of the market for years now but not at this level. It’s extremely unusual to find a home for sale in Toronto now that's not holding back offers, i.e. accepting offers at any time.
What does this mean? A couple of things. First, it means competition. You will be facing a bidding war unless it’s a total dud property (and you best be sure there are some of those out there, as there are under any market conditions). It also means that you need to go in with an extremely strong offer, right out of the gate. Make sure that you have mortgage pre-approval and if there’s a pre-sales home inspection, know that you’re unlikely to win the bid if you have any conditions in your offer. Is it fair to expect buyers to spend their life savings and waive something as critical as a home inspection? No. But this market isn’t about what’s fair. There’s simply no room for conservative offers anymore.
Secondly (and this is probably the most critical thing for buyers to realize right now), just because there’s a set offer date, it doesn’t mean the seller isn’t going to accept a bully offer. The listings agent should inform REALTORs® in advance if the seller is willing to entertain a bully offer but this doesn't always happen. They definitely should be informing all agents who have booked a viewing that an advanced offer has come in, giving you the chance to bid as well (all this is doing, in effect, is pulling the offer date forward) but again, it doesn't always happen in practice.
If we leave you with nothing else today, take away this: you MUST get in to see properties right away. If a listing comes up that you love, go to see it the very first day, in the morning whenever possible. Talk to your employer ahead of starting your property hunt to arrange for last minute time-off. It’s a pain in the caboose but it’s the reality of this market and we’re not doing our clients any favours by sugar coating it. Often times, a hot property will have a bully offer the very morning it’s listed. Even on condos, it’s not unusual for REALTORs® to book a viewing with their clients after work in the evening on day one of list, only to find out it already sold firm during the day and there are no more viewings allowed.
You may also want to consider offering before the offer date if you’re prepared to bid aggressively over list (providing it's a smart buy, of course, and that a bully offer is the right strategy - it isn't always; discuss offer strategy with your REALTOR®). At the very least, be prepared to submit a competing offer immediately if you're informed that a bully offer from someone else is on the table.
Your REALTOR® should be doing this without prodding from you but it’s incredible to us how many agents still aren’t playing by the new rules of the market (or rather, lack of rules) or aren't even aware of just how hot this market is: make sure that your REALTOR® informs the listings agent of your strong interest, immediately after viewing the property. They need to make it clear to the listings agent that you want to hear of any bully offer(s) straight away, so that you have a chance to compete. And hopefully, you will get that chance.
Unfortunately, there are some agents out there who are still not informing other interested parties when an offer's been registered in advance of the published offer date. While Toronto REALTORs® have to abide by a Code of Ethics enforced by RECO, the provincial, industry "watch dog", fines are (unfortunately) often nominal and not prohibitive. So, just know that, even when you do everything right, there are no guarantees. But also know that you have rights as consumers and, for our REALTOR® readers, as professionals in the industry.
If you suspect wrongdoing by a listings agent on a property you bid on / wanted to bid on, talk to your REALTOR® for further insight and register a complaint with RECO. Of course, if you feel your own REALTOR® may also be at fault, then contact RECO directly.
Also, have a read of our post on List Prices so you understand the realities of under-listing, a pricing strategy that has become commonplace in Toronto and surrounding areas.
It’s a red hot winter out there, folks, when it comes to Real Estate. But educate yourself, hire an expert, get your finances in order and be aggressive in your bids and you can succeed. The good news? You’ll be earning an incredible amount of equity with the right home purchase. Just make sure that you’re working with a savvy brokerage and the right REALTOR® in order to make a smart move.
Reach out to us by email, phone or drop-in in person to visit our new, larger Distillery District offices and find out more about the Property.ca difference.
We also encourage consumers and REALTORs® to have a read of TREB's 2016 Year in Review report that includes an outlook for 2017.
Lead image: Beautiful, Bay St Corridor condo for sale at time of publishing. All charts courtesy of TREB.