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Stress in December to avoid the stress test in January
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Market still active ahead of usually quiet holidays as new rules loom; condo market 'on fire'
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By CAROLYN IRELAND
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Friday, December 15, 2017 – Print Edition, Page H9


A three-bedroom house in the popular Bedford Park neighbourhood is arriving on the Toronto-area real estate market this week - even though it's the time of year when many listings typically quietly disappear for the holidays.

But 2017 has been anything but typical in the Greater Toronto Area housing market and the fickleness looks set to continue right into 2018.

Real estate agent Andre Kutyan of Harvey Kalles Real Estate Ltd. says many buyers - especially around the $1-million mark - are keen to close deals before stringent rules surrounding mortgage debt come into effect on Jan. 1. Mr. Kutyan says that, in the past, agents normally advised sellers to pause once the Christmas decorations came out.

Mr. Kutyan is listing 328 Deloraine Ave. with an asking price of $995,000. "I'm expecting action on it even though we're in the second week of December."

The detached north Toronto house is in the coveted John Wanless Jr. Public School district, and he believes buyers will be competing when it comes time to review offers on Dec. 18.

"They're ready to put pen to paper before the stress test goes through."

The "stress test" is the coming policy change unveiled by Canada's banking regulator. The Office of the Superintendent of Financial Institutions will require the lenders under its watch to ensure that home buyers who take out an uninsured mortgage can still afford to pay back the debt if interest rates climb. Holders of insured mortgages are already required to pass a stress test.

Mr. Kutyan says the fourth quarter of 2017 has been active in a way that reminds him of the last three months of 2007. At that time, buyers were scurrying to secure a deal before the Toronto land-transfer tax came into effect on Feb. 1, 2008.

Data from the Toronto Real Estate Board show that new listings in November jumped 37.2 per cent from November of 2016.

The latest number doesn't indicate, however, how many of the "new" listings actually represent the relisting of a property that didn't sell on offer night. Agents point out that the number can seem artificially high when the same property is listed more than once in the same month.

TREB also points out that 2016 marked a historically low level of listings so the comparison is more dramatic.

Douglas Porter, chief economist at Bank of Montreal, says active listings in the GTA surged 111 per cent last month compared with November of 2016.

He's not surprised that prices have undergone a correction - with the average detached price back below the $1-million mark (at $996,527) - after a runup that he likens to "making like bitcoin to start the year."

"With much of the rest of the country still reporting solid gains in both sales and prices, Toronto very much looks to be the outlier again," he says.

Mr. Porter says the cooling in Toronto partly reflects a return to reality after the madness of the first quarter, when prices were rising at a clip faster than 30 per cent on a year-over-year basis. Prices have also dropped from their peak in the spring as a result of new policies introduced by Ontario in April.

Mr. Kutyan says the number of showings he has booked on recent listings are a good barometer of buyer activity. A semidetached house at 1337 Lansdowne Ave., for example, tallied 2,903 online hits on the Multiple Listing Service, 60 broker showings, 100 groups through the open house and 14 offers.

He had set an asking price of $695,000 in the hope it would bring lots of potential buyers. He thought spirited bidding might bring the final price to $950,000 or so.

"I shook my head at the people coming through. I know I'm listing it aggressively - and that is part of the strategy, of course."

After six days on the market, the house sold for $1.026-million.

"We're definitely seeing a rush on those," he says of houses around the $1-million mark.

He adds that the condo segment is less affected by the more stringent stress test, but it's just as hot. "At any price point, it's on fire."

Condo buyers - especially those at the lower end - tend to need insured mortgages because they are more likely to be firsttime buyers and may not have large down payments.

Mr. Kutyan believes condo units are in high demand because they sell for an average price of $555,396 in the central 416 area code, compared with an average of $802,220 for all housing types in the 416.

"People are realizing to own real estate in the city of Toronto, it's going to have to be sky space."

He recently listed a twobedroom, two bathroom unit of approximately 750 square feet for sale on Nelson Street in the downtown core. He set a low asking price of $488,000.

"My clients literally had to move out of their condo for a few days - because they've got a young child - to accommodate all the showings."

Mr. Kutyan says the property received 2,002 hits on MLS, 104 broker appointments and five offers. It sold for $581,800. "The person who got it won by a hair."

Looking ahead, he expects sales in early January to be slow, which is quite typical for the start to the year. But he believes the first few months may be less active because some sales have been pulled forward. "We might see a lull in the first quarter."

COURT RULING ON DATA SHARING

Another factor that agents will be watching closely is a recent ruling by the Federal Court of Appeal that allows more open sharing of sale prices from real estate transactions. The appeal court ruled that TREB could not prevent its members from providing data about how much homes sold for. TREB argues that the practice would breach privacy restrictions and says it plans to seek leave to appeal the decision, as well as an order staying the decision pending the outcome of that appeal, if granted.

Some online services began posting information immediately after the ruling.

Davelle Morrison, an agent with Bosley Real Estate Ltd., believes that TREB should survey its members and find out how much enthusiasm they have for the fight. In her opinion, TREB is wasting money on legal fees. She launched a petition arguing that TREB members should be consulted after agents began sharing their views in Facebook groups.

"This is a bit of a waste - just accept the future," she says.

Until the ruling, TREB real estate agents could distribute limited sales data up to 100 clients at a time but could not publish all data broadly. That meant that a homeowner who wanted to know what a neighbour's home sold for, for example, would have to call an agent to inquire.

Ms. Morrison says some agents fear the more open sharing of data will lead clients to perceive agents as less useful, but she disagrees.

She points out that there are 49,000 agents in Toronto and anyone interested in real estate can keep a few on speed dial.

Good agents, she adds, provide a lot more to their clients than just passing on selling prices.

Ms. Morrison would like to see the data in wide release after a transaction has closed. At the moment, some prices are providing details after an agreement has been signed but before closing. That approach may give consumers misleading information because some deals fall through, she argues.

Mr. Kutyan agrees that the wide distribution of information won't affect well-established realtors.

"I believe it could cut out more of the riff-raff agents who work part time," he says.

He says he already provides a detailed sales history to his clients, along with data about other sales on the street.

"Every block of every street is different," he says. "I know how to decipher this data."

Still, Mr. Kutyan says he's not a fan of the prospect of releasing all of the information because TREB members have to pay dues and that's part of the value members receive for their money.

Associated Graphic

A condo unit on Nelson Street received 2,002 hits on MLS, 104 broker appointments and five offers before selling for $581,800.


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