Real estate perks up in Southern Ontario

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Cities in Southern Ontario are seeing a pickup in real estate activity as buyers try to strike deals before heat returns to the market.

Some properties are selling to competing buyers in cities such as Guelph, Cambridge and Kitchener-Waterloo, though bidding remains subdued.

Unusually mild temperatures may be one factor in the cities west of the Greater Toronto Area: In many years winter weather hampers January sales, but relatively light dustings of snow in 2024 so far have encouraged sellers to list their properties and real estate buyers to circulate.

Potential buyers in the Kitchener-Waterloo area seemed mired in uncertainty in the fall says broker Faisal Susiwala of Re/Max Twin City Faisal Susiwala Realty.

A couple of interest-rate hikes by the Bank of Canada last summer surprised consumers, he says, and many became hesitant to buy or sell.

“They didn’t want to be fooled again,” says Mr. Susiwala.

“The stagnation has lifted in recent weeks,” he says, pointing to a combination of softer prices and an expectation among consumers that interest rates will fall later this year, which in turn may revitalize sales.

A slight shift in tone from the Bank of Canada has also bolstered consumer confidence, says Mr. Susiwala.

In late January, the central bank held its key interest rate steady at 5 per cent. Bank of Canada Governor Tiff Macklem said discussions among members of the Governing Council has turned to how long the policy rate needs to stay at its current level.

A modest bungalow in Galt, Ont.’s north end recently drew 17 bids after it was listed with an asking price of $599,000, says Mr. Susiwala, who advised his clients against jumping into the contest when he saw the number of offers piling up.

The house sold for $710,000, which was higher than the $650,000 he estimated it was worth, says Mr. Susiwala.

The property drew attention because it was located a few minutes’ drive from Highway 401, provided a one-bedroom in-law suite and sat within walking distance of a place of worship, he adds.

“The most attractive house today is one that has a separate space such as a basement apartment or an in-law suite,” says Mr. Susiwala, who explains that many buyers want to rent out part of the house to help with mortgage payments.

Mr. Susiwala hasn’t seen a house in the area fetch so many offers since the market peak in the early months of 2022.

More typically, competition takes place in the lower price segments and brings a handful of offers, he says.

Housing sales in Kitchener-Waterloo dropped 14.3 per cent in 2023 compared with 2022, according to the Canadian Real Estate Association.

The average price declined 8.1 per cent to $790,035 last year compared with $860,101 in 2022, CREA says.

Mr. Susiwala says he has continued to set offer dates even during the market slowdown for properties listed in the more affordable segments below $1.5-million.

His rule of thumb is to set an asking price about $50,000 below his estimate of market value.

Mr. Susiwala recently listed a compact 1,100-square-foot house with an asking price of $499,000. The house was livable but dated, he says, and sold for $555,000 with six offers.

He expects the market around Kitchener-Waterloo to pick up more strongly in March because that’s when the bulk of buyers from the GTA arrive. Many people from Mississauga, Brampton and Milton are moving west to find more affordable homes, he says, but they typically tie their moves to the school year.

In nearby Guelph, Aimee Puthon, real estate agent with Coldwell Banker Neumann Real Estate, has seen a fair amount of activity in all price ranges this month.

She sold four properties in the second week of January after a very quiet November and December, she says.

Ms. Puthon listed a three-bedroom condo townhouse with an asking price of $889,000 and sold it for $879,000 on the first day on market.

The buyers made a quick decision before they left for Florida the next day, she says.

On another deal, she sold a two-bedroom condo after it sat on the market for 95 days during the fall with an asking price around the $550,000 mark. Ms. Puthon cut the asking price to $519,000 in January and the unit sold for $512,000 within five days.

Ms. Puthon also represented buyers who outbid three rivals with their offer of $820,000 for a two-bedroom house in downtown Guelph. The house, listed with an asking price of $799,000, had previously been on the market for 42 days, she says.

The buyers will now sell their house in Orangeville, she says.

Buyers are willing to bid on properties with multiple offers but she doesn’t see the “fear of missing out” that quickly sent prices surging during the early years of the COVID-19 pandemic.

Ms. Puthon expects more listings to arrive on the market in the coming weeks but most sellers will wait until later in March, she adds.

Stephen Brown, deputy chief North America economist at Capital Economics, is forecasting that the Bank of Canada will cut its benchmark rate in April.

In Mr. Brown’s opinion, mortgage interest costs and rent are the two main factors keeping inflation above the central bank’s 2 per cent target. While Mr. Macklem remains concerned about inflation, he may be willing to attach more weight to where shelter inflation is heading rather than where it is now, he says.

“Given that interest rates and immigration have almost certainly peaked, we know that shelter inflation will gradually grind lower,” says Mr. Brown in a note to clients.

That view has been bolstered following the federal government’s announcement last week that it will temporarily cap the number of student visas issued to foreign students, he adds.