12 hours ago
Dog days come early for Toronto homesellers
Sellers in the Toronto-area real estate market are facing a slow and stifling summer as buyers take their time and negotiations drag on.
Inventory ballooned in May from the same month last year, and sales remained historically low for a month that typically marks the height of the spring market.
In the condo segment, buyers feel empowered by an abundance of listings, says Christopher Bibby, broker with Re/Max Hallmark Bibby Group Realty.
Some can be ruthless in their negotiating tactics.
In May, the average price for a condo apartment in central Toronto, where Mr. Bibby concentrates much of his business, was $758,214. That marks an 8 per cent slide from May of last year.
'That is a significant number,' says Mr. Bibby of the drop.
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Condo sales fell 21 per cent in the same period in central Toronto and active listings increased 14 per cent.
As a result, units sometimes sit so long between showings that owners call to ask if their notifications are still active.
'This is the most active number of price reductions I've seen in my entire career,' says Mr. Bibby, who was selling real estate through the 2008 financial crisis.
In some cases, condo owners who purchased in 2019 are looking at selling for less than they paid.
Pritesh Parekh, real estate agent with Century 21 Legacy Ltd., says he has never experienced a market so steeply tilted in favour of buyers.
Still, he says, prices have held up fairly well given the amount of supply.
He points to data from the Toronto Regional Real Estate Board which shows the average price of a detached house dipped 5.4 per cent in the Greater Toronto Area last month from May, 2024 to stand at $1,425,264. Sales of all home types in the GTA dropped 13.3 per cent in May compared with the same month last year while active listings swelled by 41.5 per cent.
Daren King, economist at National Bank of Canada, says market conditions in the GTA are at their softest since 2008-2009.
Mr. King notes that overall sales rose 8.4 per cent on a seasonally adjusted basis in May from April, but remained 29 per cent below their most recent peak in November.
The sharp deterioration of the labour market in the GTA will limit the extent of any potential recovery in the market, Mr. King cautions in a note to clients.
Mr. Parekh points out that many of the conditions that buyers were wishing for during the market frenzy – including more listings to choose from and cooler competition – are here, but buyers are still hesitant.
He remembers taking buyers to newly listed properties and urging them to let him know right away if they wanted to make an offer.
'It's so vivid,' he says, recalling the fast pace. 'I would say, 'I'm going to sit in my car and draft an offer.' I didn't want to risk driving home.'
Now Mr. Parekh is working with some first-time buyers who have their financing lined up and plenty of time to make decisions, but they are still fearful of how economic and political turmoil might affect them.
Many buyers are also anticipating that interest rates will continue to fall, he says. Others are worried about unemployment.
In one case, Mr. Parekh was working with a house hunter who had been looking for many, many months but always remained cautious.
'Then they actually lost their job. It actually happened in the GTA,' Mr. Parekh says of the moment the hypothetical became real.
When word spreads amongst friends and family about a lost income, it undermines the confidence of other potential buyers.
'People start to think about their own security with their jobs.'
Mr. Parekh says some buyers who do have steady employment may be able to take advantage of the current downturn in the market if they are planning to own the property for the medium to long-term.
He doesn't see a quick turnaround any time soon.
'It feels like this time, it will be a slow transition to a different market,' he says.
In the condo segment, Mr. Bibby has recently been stickhandling offers for eight of his listings. Only two so far have resulted in signed deals.
In some cases, the two sides sign offers back and forth until they are close to an agreement, then the potential buyer walks away.
The same buyer will return a day later with an offer $20,000 below their previous one. A week later, they reduce their offer to $50,000 below that.
Mr. Bibby says the buyers playing hardball believe sellers are in distress, but for owners who bought their units years ago, that's often not the case.
'None of those eight people had to take what was in front of them,' he says. 'The buyers are looking for blood, but the sellers will decide what they're willing to accept.'
He adds that high-pressure manoeuvres can backfire because they turn off sellers.
'They could do it with a little more dignity,' he says of buyers pushing for a deal. 'We don't want to sour the negotiation.'
Mr. Bibby says some people planning to sell still contact him believing that they can achieve a 2021 price because their building, finishes or view is superior to the competition.
'I think the numbers that a lot of people have in their minds – those numbers are long gone.'
It's important for potential sellers to understand that their ambitious price can quickly be undercut if a unit in the same building comes on the market with an asking price five per cent below that, he adds.
When the lower price results in a sale, that becomes the new benchmark.
Over the summer, the stream of new listings may slow in the condo segment, Mr. Bibby predicts. But he is already receiving calls from sellers who are looking optimistically towards the fall market.
If positive signals emerge, such as the Bank of Canada cutting its key interest rate, or good news coming out of trade talks, the market may stabilize as prices come down and supply flattens out, he says.
But Mr. Bibby doesn't see the basis for a strong rebound in the fall.
'Even if we recover, are we going to be better off in a year? I don't think so.'
Mr. Bibby believes the current malaise is partly the unwinding of the unharnessed run-up in prices during 2020 and 2021. It will take time to work through the bloated inventory.
'Where we are today doesn't surprise me,' he says. 'The ingredients have been there for a long time.'
