Toronto’s real estate market has entered its biggest slump in decades, yet some properties are generating a surprising amount of competition.
A three-bedroom bungalow at 6 Hancock Cres. in the Wexford-Maryvale neighborhood recently drew a startling 57 offers. It sold for $390,100 above the $629,900 asking price.
Another three-bedroom home at 4 Princeway Dr. in Scarborough attracted 23 offers and sold for $251,000 above the $799,000 asking price.
“It was out of control,” said Belinda Lelli, a realtor with Royal LePage’s corporate brokerage in Toronto of the home at Princeway Drive. “With that price point, we knew we were going to get some offers. We just didn’t know we would get 23.” Lelli said.
“I had three people working on it and fielding calls… It was crazy.”
Realtors say they’ve witnessed unprecedented bidding wars in recent weeks — not seen since home sales peaked in February — as prospective buyers scramble to sign a deal before their mortgage pre-approvals expire. And before another interest rate hike by the Bank of Canada.
“Buyers are feeling the pressure to take advantage of the interest rates that they locked in months ago by purchasing before their preapproval expires, and before rates go up significantly,” said Lorry Greenspan, a real estate agent with Forest Hill Real Estate. “It’s leading to heightened competition for certain properties as buyers are trying to take advantage of their interest rate.”
To bring rising inflation back under control, the central bank earlier this month raised the benchmark interest rate by three-quarters of a percentage point — the fifth rate increase since March — bringing the overnight lending rate to 3.25 per cent. The central bank signaled that Canadians should expect interest rates to climb even higher as it continues its battle against high inflation.
As home prices drop, increasing mortgage rates due to rising interest are making it more challenging for buyers to qualify for those mortgages. Pre-approval rates allow prospective buyers to secure a rate while they look for a home and gives them roughly 90 to 120 days of interest rate protection before they expire.
Because of the competition, Greenspan said he has seen “two markets happening at the same time.”
“One is that slow market that we’ve become used to where interest rates are putting downward pressure on prices,” Greenspan said. “But at the same time, I’m seeing another market, eerily similar to February, where when some properties come to market there is intense pressure and competition and they’re either receiving multiple offers or they’re receiving offers very quickly into the listing process.”
Another factor driving competition is a lack of inventory, said Karen Yolevski, COO of Royal LePage Real Estate Services Ltd.
In July, home resales in Toronto were down about 47 percent compared to the previous year, while new listings fell by about four percent according to Statistics Canada. Adding to the lack of inventory, sellers, many of whom have not been getting desirable offers, are canceling property listings, leaving prospective buyers with limited options.
Developers are also expected to delay building 10,000 new condominium units as preconstruction sales plunge amid interest rate hikes, increasing the strain on potential buyers.
“We’re not seeing it on every deal, but we are certainly seeing multiple offers depending on the house,” Yolevski said. “When you don’t have a tremendous amount of inventory in the market, you are creating a situation where houses that are well positioned, well priced and attractive, those are going to get scooped up.”
Yolevski added that a bump in sales is also normal for a fall market.
“What we’re also seeing is a return to somewhat of a normalized market. We may have forgotten what a normal real estate market looks like in the GTA, where there is a bit of a lull in the summer and then things pick up again in September,” Yolevski said.
The initial shock of soaring interest rates has also normalized according to Greenspan.
“As rates continue to go up, seemingly every rate you can get right now is going to be better than the rate you’re going to get in a couple of weeks or months,” Greenspan said.
“The shock has worn off. The reality has set in. And if a buyer wants to buy something, now is a better time than it will be in a couple of months when rates will increase even further.”
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