August 03, 2022
Market Trends
RYPM
TORONTO - When Shannon Tebb listed her downtown Toronto loft
for sale in mid-June, she did everything to make the property attractive to
buyers. She hired stagers, painted walls, washed the windows, listed the place
below market value, and advertised all over social media.
But by July, she was pulling the property off the market —
and not because she’d found a seller.
Tebb terminated the listing because the market shifted so
significantly that the bidding wars and frenzied pace of sales seen earlier
this year had dissipated.
Last month, the Canadian Real Estate Association (CREA)
reported June home sales amounted to 48,176, a 24 percent drop from 63,280
during the same month last year. On a seasonally adjusted basis, sales were
down almost six percent from May.
The fall has been attributed to interest rates, which are
rising at a faster pace than some anticipated and pushing up the cost of a
mortgage, and inflation, which recently hit a 39-year high.
Both have made it routine for properties to sit for weeks or
months, pushing sellers to make tough decisions.
Since she wasn’t getting much interest in her listing, Tebb
terminated it and turned the loft into a rental property instead.
“Everyone was saying, ‘nobody’s going and looking at
anything,’ so then we lowered the price...and we had a few walk-ins but
nothing, no offers.”
Strata found a surge in people mirroring Tebb’s decision to
delist their property.
While January’s hot market saw 380 terminated condo listings
in the Greater Toronto Area, the real estate company said June brought 2,822 —
a 643 percent increase.
“We’re seeing a lot of sellers just not getting the price
they want and so they’re like, ‘we’re going to hold off or ‘I don’t want to
sell $50,000 lower from what my neighbor got a month ago because that’s a lot
of money,’” said Anna Wong, a Strata sales representative.
“We were in a seller’s market for a while ... and right now
sellers are having a hard time adjusting.”
CREA found the national average home price in June fell two
percent from the same month last year to $665,849 and, on a seasonally
adjusted basis, was down four percent from May.
“We are seeing some sellers stick on the market. They’re
listing their properties trying to get yesterday’s prices and they’re staying
on for long periods of time,” said Dan Campanella, a broker with Keller
Williams Advantage Realty, who represented Tebb.
Some terminate their listings and continue to live in the
properties while they wait for a better time to sell, but others not fetching
their desired amount delist to experiment with pricing or turn to the surging
rental market.
Research firm Urbanation recently reported falling vacancy
rates in Toronto in the second quarter pushed up the average rent to $2,533
with a record high of $3.57 per square foot, up 5.9 per cent in the second
quarter compared with the first.
Rentals.ca similarly found average rents in Canada were up
9.5 per cent from a year earlier, while Vancouver had a 24.7 per cent jump from
a year earlier and Calgary saw a 26.1 per cent increase.
Campanella describes the rental market as “on fire,” largely
because of prospective first-time buyers.
“When their purchasing power drops significantly, they can’t
buy their first condo but they still need to move downtown, so now that means
there’s more and more people looking for rentals,” he said.
“The prices are skyrocketing.”
Anne Hermary, a Vancouver real estate adviser with Royal
LePage Westside, has similarly seen a surge in the rental market.
While she hasn’t dealt with any listing terminations, she
suspects some sellers won’t wade into the market because of current conditions.
“I am sensing from my database of clients who have
properties, that don’t necessarily need to sell or make a move, that there’s no
motivating factor right now,” she said.
“They may have been thinking of downsizing. They’re waiting
to see what happens.”
Buyers are playing the waiting game too, Hermary added.
“Some are completely out of the picture now because they
can’t get financing approval for what they’re hoping to buy, but others are
just waiting because they feel the market is going to continue moving down in
price.”