Real Estate

Toronto agents see rush of buyers ahead of new mortgage rules

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  • Nov 30th, 2017 1:38 pm
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Feb 7, 2006
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Toronto agents see rush of buyers ahead of new mortgage rules

On a recent Friday evening in Toronto, real estate agent Christopher Bibby was staying late at the office.

He had three offers on the go – for three different condo units he had listed around the $2-million mark. Before the night was done, all three had sold.

"There's a bit of a push to secure property before the end of the year," he says.

Mr. Bibby, with Re/Max Hallmark Bibby Group Realty, specializes in unique lofts and luxury condo units. In that niche, he says, inventory is low and buyers are focused. He believes uncertainty surrounding the new "stress test" for mortgage lending coming into effect on Jan. 1 is driving some of the action in the Toronto-area market right now.

"People are saying, 'We can't predict what's going to be happening four to six months from now – let's do this now.'"

As for the sellers, all three were listing for reasons of "age and stage," as agents say. One is moving to Italy, another to Niagara and the third into a retirement home.

On that frenetic Friday night, the board that shows the weekly deal tally in Mr. Bibby's office showed he had already logged 10 deals in eight days.

"It's ridiculous how busy we've been."

Last month, Canada's banking regulator, the Office of the Superintendent of Financial Institutions, unveiled new rules designed to mitigate risk for lenders. The regulations will require buyers with uninsured mortgages to prove they could still afford their monthly payments if interest rates were two per cent higher than the rate they negotiated.

Some house hunters are trying to avoid the "stress test" by buying before the end of 2017.

Mr. Bibby says that this late in November, buyers are anticipating that the market will slow down for the holidays.

"People aren't really expecting to see a lot of new listings coming up."

He recently sold a loft in the coveted Candy Factory building on Queen Street West for $2-million after receiving two offers. The unit needs renovation, he says, so he set the asking price at $1.895-million.

The buyer's real estate agent walked through the agents' open house at 10 in the morning, recording a video to send to her client in the United States. Within six hours the deal was done.

"The buyer from San Francisco didn't ever see it," Mr. Bibby says.

Across the country, home sales rose for a third consecutive month in October. Compared with October, 2016, sales dipped 4 per cent last month on a national basis.

Adrienne Warren, economist at Bank of Nova Scotia, says the pickup is being led by the Greater Toronto Area, as well as some cities in the surrounding Greater Golden Horseshoe. While sales in the region remain well below their earlier peaks, buyer nervousness following the Ontario government's spring policy changes has eased, she says.

In April, the Ontario government introduced policies designed to cool the real estate market – particularly in overheated Toronto. One of the new measures was a tax on purchases by non-residents.

Ms. Warren adds that the Toronto-area market continues to tilt towards the more affordable semi-detached, townhome and condominium segments of the market over detached houses.

Vancouver's market, meanwhile, continues to gain momentum, with affordable property types leading demand there too.

Agents say the market for single-family homes is unpredictable in the GTA, where some houses sell quickly on offer night but many others are languishing.

Mr. Bibby says sellers who compare the prices today to the record levels in April are bound to be disappointed.

"Homeowners – they're out to lunch," he says of those who don't grasp that the market for detached houses have been the hardest hit.

He worked with some buyers recently who were the only bidders for a Toronto house on the night set for reviewing offers. The sellers had set a low asking price in the hope of sparking competition. When the bidding war didn't materialize, they relisted the property the following day at a higher price.

Mr. Bibby calls that practice very disappointing and frustrating for buyers.

"You don't have five offers – you have one offer," he says he told the listing agent that night. Still the sellers were not willing to negotiate. "Emotionally it's not a kind thing to do. I understand. They're in control."

His downcast clients left without a deal that night.

"You walk and they call you the next day and they call you the day after that," he says.

Eventually his clients were able to buy the house for $140,000 less than the revised asking price.

Mr. Bibby believes that listing agents have to prepare their clients for various scenarios – including not getting a single buyer at the table on offer night.

"With freehold, expectations are being mismanaged," he says.

In the condo market, which has remained strong, Mr. Bibby is fielding calls from investors as well as buyers who want to live in the unit. Calls from foreign buyers are rare, he says.

Ms. Warren expects that higher interest rates and the OSFI's changes will have some cooling effect on sales in the New Year – especially in high-priced markets.

She estimates that about 10 per cent of loan applications in October would no longer qualify under the new rules.

The impact on sales will be smaller, she anticipates, because some buyers may choose to purchase a lower-priced home, while others may be able to extend their amortization period or opt for a lower variable mortgage rate.

Another factor that may weigh on the Toronto market in 2018 is the heavy cost of trading up.

Transaction costs – including commissions, fees and taxes – have become so steep that people aren't making lateral moves, Mr. Bibby says. If a homeowner plans to move up to a more expensive property, the leap has to be significant to make it worthwhile.

"To come up with another $200,000 or $300,000 is a lot of money."

https://www.theglobeandmail.com/real-es ... e37109904/
30 replies
Deal Addict
Jun 11, 2005
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Thanks for cutting and pasting! Not a Globe subscriber here...
Jr. Member
Jun 3, 2017
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winner2000 wrote: He had three offers on the go – for three different condo units he had listed around the $2-million mark. Before the night was done, all three had sold.
...
Mr. Bibby, with Re/Max Hallmark Bibby Group Realty, specializes in unique lofts and luxury condo units. In that niche, he says, inventory is low and buyers are focused. He believes uncertainty surrounding the new "stress test" for mortgage lending coming into effect on Jan. 1 is driving some of the action in the Toronto-area market right now.
Would someone kindly ELI5 how on earth are these two things connected? How does this new stress test affect someone who can afford a 2 million dollar condo.
Last edited by AnotherDesiredUsername on Nov 28th, 2017 6:38 pm, edited 1 time in total.
Deal Fanatic
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Sep 8, 2007
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Way Out of GTA
AnotherDesiredUsername wrote: Would someone kindly ELI5 how on earth are these two things connected? How does this new stress test affected someone who can afford a 2 million dollar condo.
Lol....good catch!
Deal Fanatic
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Sep 8, 2007
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Way Out of GTA
AnotherDesiredUsername wrote: Would someone kindly ELI5 how on earth are these two things connected? How does this new stress test affected someone who can afford a 2 million dollar condo.
Lol....good catch!
Deal Fanatic
Dec 5, 2009
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AnotherDesiredUsername wrote: Would someone kindly ELI5 how on earth are these two things connected? How does this new stress test affect someone who can afford a 2 million dollar condo.
Because it might be mostly purchased on debt. It can affect everyone, by reducing the amount of mortgage you can qualify for. Assuming that $2M condo buyer needs a mortgage it could certainly affect them.
Newbie
Sep 23, 2017
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winner2000 wrote:
The buyer's real estate agent walked through the agents' open house at 10 in the morning, recording a video to send to her client in the United States. Within six hours the deal was done.
I think this buyer will be subjected to 15% foreign buyers tax as well as stress test.
Deal Guru
Feb 22, 2011
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AnotherDesiredUsername wrote: Would someone kindly ELI5 how on earth are these two things connected? How does this new stress test affect someone who can afford a 2 million dollar condo.
It doesn't. People are trying to connect dots between two unrelated things. Market has been recovering the last few months, before the change was announced, this has nothing to do with new rule change. People commenting that it's mostly debt need to get a grip. Canadian banks aren't now, and were never, giving out $2m with no collateral. There's a reason they are world renowned and did well in the financial crisis.
Jr. Member
Jun 3, 2017
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rjg4235 wrote: It doesn't. People are trying to connect dots between two unrelated things. Market has been recovering the last few months, before the change was announced, this has nothing to do with new rule change. People commenting that it's mostly debt need to get a grip. Canadian banks aren't now, and were never, giving out $2m with no collateral. There's a reason they are world renowned and did well in the financial crisis.
Up-voted this. A far more convincing explanation than what @fabricatordog wrote above.
Last edited by AnotherDesiredUsername on Nov 28th, 2017 10:27 pm, edited 1 time in total.
Deal Guru
Feb 9, 2009
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fabricatordog wrote: I think this buyer will be subjected to 15% foreign buyers tax as well as stress test.
Foreign tax possibly.. stress test? he's buying in cash baby!
Deal Addict
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Sep 4, 2005
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rjg4235 wrote: It doesn't. People are trying to connect dots between two unrelated things. Market has been recovering the last few months, before the change was announced, this has nothing to do with new rule change. People commenting that it's mostly debt need to get a grip. Canadian banks aren't now, and were never, giving out $2m with no collateral. There's a reason they are world renowned and did well in the financial crisis.
This. The market is slowly recovering. The rules surrounding tighter lending are already priced into everything. There isn't going to be a big magical drop come January. Sellers still are pouring to the market and taking whatever, they are holding firm. Once the lower buying power hits, sure you'll see a few people who have to sell accept less money. But overall a lot of people are selling because they want to, not because they need to.
Sr. Member
Aug 5, 2012
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MISSISSAUGA
2016 was the peak and the dream year for sellers in GTA real estate market. Doubt if sellers will ever have it as good as it was in 2016.
"You have more chances of getting hit by a lightning or getting eaten by a shark than actually winning a lottery"
Deal Guru
Feb 9, 2009
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vik56in wrote: 2016 was the peak and the dream year for sellers in GTA real estate market. Doubt if sellers will ever have it as good as it was in 2016.
Uh huh they been saying that for 60+ years ... mkt definitely won’t be on fire fir a while but real estate will have a 2016 again down the line ...
Penalty Box
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Jul 11, 2008
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Away from RFD idiots
More logical explanation is that crypto millionaires are popping up and buying these condos.
..
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Sep 5, 2009
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My house just sold, we have lots of visits (40 plus), but only 2 offers. There are lots of people looking but no one is in a rush to buy.
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Deal Guru
Feb 22, 2011
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dgnr8 wrote: My house just sold, we have lots of visits (40 plus), but only 2 offers. There are lots of people looking but no one is in a rush to buy.
That's a good thing. The market is not only recovering but more stable and rational. People pointing to April as the mark to be compared to are crazy. Why would you think the market should be that insane? Bidding wars with no conditions and people over paying. That was never sustainable or healthy. Comparing to that is absolutely ridiculous.
Deal Addict
Sep 5, 2009
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rjg4235 wrote: That's a good thing. The market is not only recovering but more stable and rational. People pointing to April as the mark to be compared to are crazy. Why would you think the market should be that insane? Bidding wars with no conditions and people over paying. That was never sustainable or healthy. Comparing to that is absolutely ridiculous.
April was crazy, but so is the fall from April. Homes selling for $1.5-$1.6 in April are selling for $1.2-$1.3 right now
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Sep 12, 2006
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dgnr8 wrote: April was crazy, but so is the fall from April. Homes selling for $1.5-$1.6 in April are selling for $1.2-$1.3 right now
That's called a regression to the mean. Nothing crazy about it.

Those that were able to suppress their FOMO in April are going to capitalize in January when it should be as close to a buyer's market as we get.
Deal Guru
Feb 22, 2011
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dgnr8 wrote: April was crazy, but so is the fall from April. Homes selling for $1.5-$1.6 in April are selling for $1.2-$1.3 right now
Lol like I said, people got into bidding wars in April and over paid. Turns out a 30% gain in 1 year wasn't sustainable.
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Apr 21, 2004
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alex_d10 wrote: That's called a regression to the mean. Nothing crazy about it.

Those that were able to suppress their FOMO in April are going to capitalize in January when it should be as close to a buyer's market as we get.
+1
Peak was good for two or three months so not a lot of sellers who made out like a bandit short-term and not a lot of buyers who bought 20% more of what properties are selling for now.

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