The two-bedroom penthouse condo at 138 Princess St., in Toronto was priced at $949,900, but ended up selling under asking for $915,000.Jordan Prussky Photography
The pace of the Toronto-area real estate market feels slightly more energetic in January as some aspiring buyers take tentative steps away from the sidelines.
“Showings are increasing – that’s a good sign,” says Christopher Bibby, broker with Re/Max Hallmark Bibby Group Realty. “I’m starting to see second and third showings. This is a sign of improvement.”
Prices softened over the fall, and sellers willing to price their house or condo realistically were able to strike deals during December and early January, he says.
“The sooner we come to terms with the fact prices have come down, the sooner we’ll see more transactions,” says Mr. Bibby.
In December, the average price in the Greater Toronto Area stood at $1,084,692 compared with $1,119,428 in September.
The average condo price in the central 416 area code dipped to $709,283 in December from $732,106 in September.
Mr. Bibby says some sellers became more willing to work with offers on the table as the fall wore on.
One set of buyers wrangled for several weeks to purchase a detached house at 78 Clonmore Dr. in Scarborough listed for 52 days with an asking price of $2.588-million.
Three days after Christmas, the buyers signed a deal for $2.275-million for the four-bedroom house.
“I think everyone was trying to establish where we were,” Mr. Bibby says of the lengthy negotiations.
With signs of renewed interest from buyers, Mr. Bibby listed two condo units for sale during the third week of January and sold both within seven days. He set asking prices that were in line with the market but slightly above the amount the seller was hoping to achieve.
“We were of the mindset we would need wiggle room.”
At 138 Princess St., Mr. Bibby set an asking price of $949,900 for a two-bedroom penthouse in the building’s south-west corner. The unit sold for $915,000.
“People are being budget-conscious in the market and don’t want to overpay,” Mr. Bibby says. “It’s very important for buyers to feel they’re getting just a little bit off.”
He adds that potential buyers who have been waiting on the sidelines are reading real estate forecasts predicting that prices will begin to rise again during 2024.
“A lot of buyers want to make a decision before the tipping point,” he says, adding that many potential buyers are taking note of optimistic outlooks based on the assumption that the Bank of Canada will cut its benchmark interest rate in the spring.
Jimmy Molloy, real estate agent with Chestnut Park Real Estate Ltd., notes that last year the GTA tallied its worst year in sales since 2000.
The Toronto Regional Real Estate Board reported 65,982 sales through its Multiple Listing Service last year.
Mr. Molloy points out that the low number of transactions comes despite a surge in population growth in the past decade.
He believes there’s a large amount of pent-up demand that will be released once potential buyers feel more confident that the market has reached a floor on prices.
The decrease in prices in the GTA since the peak in February, 2022 follows a strong run-up during the early years of the COVID-19 pandemic.
“A lot of that COVID premium has been taken out of the market.”
Christopher Bibby, the listing agent for the Princess St. condo, pursued a pricing strategy with two condo listings that involved setting asking prices that were in line with the market but slightly above the amount the seller was hoping to achieve.Jordan Prussky Photography
But that dip also discourages homeowners who are thinking about listing, he adds.
“There are sellers for sure who think this is not the time to give away their property.”
As more listings arrive with the start of the spring market, buyers will become more engaged, he says.
“Inventory gets people’s attention.”
Farah Omran, senior economist with the Bank of Nova Scotia, warns that December’s surprise jump in sales does not necessarily indicate the beginning of a potential rebound in response to the Bank of Canada cuts that many industry players and consumers are anticipating.
Last year, sales across Canada came in 11.1 per cent below their 2022 level, listings dipped 7.7 per cent and the average price dipped 3.6 per cent in the same period.
Ms. Omran points out that speculation about the Bank of Canada’s moves – and not just the policy announcements themselves – had a large impact on the country’s housing market last year.
After the Bank of Canada paused its rate hiking campaign in December, 2022, financial markets began pricing in rate cuts in 2023, which translated into a reduction in fixed rates, she notes.
This enticed buyers who had been on the sidelines as rates increased and prices declined to return to the market. Those buyers had amassed larger down payments during the slowdown, she adds, and were therefore equipped to join the market once signs of the end of the correction emerged, encouraged by the widespread conviction that cuts were imminent.
A resurgence in activity led to a premature end to the correction, which posed challenges for the Bank of Canada and its efforts to slow down the economy and bring inflation back to its 2 per cent target, she explains.
“This in large part was behind the June and July hikes, following which, housing activity tapered off and began declining again.”
The cost of borrowing rose, Ms. Omran notes, but she believes the bigger driver of the downturn that followed was the uncertainty created by the central bank’s signalling that a pause is not a guarantee of an end.
Sales slowed as the lack of clarity about the future of rates, inflation and economic activity dawned on potential buyers, she adds.
In the second half of 2023, still-lofty prices, high borrowing rates and an unpredictable outlook for the economy pushed buyers to the sidelines.
Looking into the coming months of 2024, Ms. Omran expects the housing market to be buffeted by changing forces.
She notes that the pent-up demand amongst buyers may draw some out even before the Bank of Canada begins cutting rates as they try to snag a fixed-term mortgage with a lower rate – along with the lowest house price they can lock in before the next upswing.
But buyers may face headwinds in the form of a slowing economy and an uptick in unemployment.
A countering force could come from inflation and the Bank of Canada: “If the resulting return of activity occurs too fast and too strong for comfort, whereby upward pressure on prices reintroduces inflationary pressures, the Bank of Canada might consider hiking again.”
Mr. Bibby sees another possible dynamic: he wonders if supply will swell at the first sign of strength. Many homeowners who tried to sell their properties in the fall were unsuccessful, he points out, and some will list again when they see signs of a rebound.
At the same time, many homeowners who have been putting off listing so far are pondering a move, and the usual spring bump in listings may take place.