How to navigate Toronto’s changing real estate market

Real estate experts weigh in with tricks and tips, whether you’re looking to buy or sell.

While home prices are falling, interest rates are rising. It’s a confusing time to buy or sell a home in the GTA.

The housing market is expected to crash, with home prices falling by at least 30% by the spring of 2023, providing some relief for prospective buyers who might not have been able to enter the market a year ago.

High-interest rates, on the other hand, pushed aggressively by the Bank of Canada to cool inflation, have dramatically increased mortgage rates, offsetting the lower purchase price of a home.

“It’s an unusual time in the market, and there are a lot of people with a lot of questions, anxieties, and confusion trying to figure it all out,” says Gus Papaioannou, a Realosophy Realty agent in Toronto..

Since the market began to cool in early 2022, uncertainty has taken hold. According to the Toronto Regional Real Estate Board, unit sales in Toronto fell by more than 44% from September 2021 to September 2022, and the average selling price fell to $1.09 million, down from a high of $1.33 million in February.

Meanwhile, sellers are delaying listing properties because they are concerned that they will not make as much as they did earlier this year when the market was hot, resulting in the lowest inventories in decades.

So, should you purchase it? Should you sell your home? Should you hold off?

Experts in real estate weigh in on what it all means, whether you’re buying or selling.

If you’re buying

The first step for buyers, according to Papaioannou, is to understand the numbers. Understanding pre-approval rates and upfront costs such as utilities, condo maintenance fees, land transfer tax, and lawyer fees are all part of this.

Buyers should obtain pre-approval rates and speak with their lenders to fully understand what they can afford and ensure that they remain below that rate when submitting an offer.

As home prices fall, rising mortgage rates caused by rising interest rates make it difficult for buyers to qualify for those mortgages. Pre-approval rates allow prospective buyers to lock in a rate while looking for a home and provide them with 90 to 120 days of interest-rate protection before they expire.

According to Papaioannou, a critical consideration for buyers is to purchase a home “you will live in for seven to ten years.” In this volatile market, you should expect a house to appreciate by three to five percent year over year.

“If you plan it that way, and it appreciates at the low end, say 3%, then when you go to sell in seven years, you’re not in the hole and can afford to pay things like realtor fees, land transfer tax, and other fees.”

Anu Joshi, a realtor at Home Life Miracle Realty, advises buyers considering lowballing a home offer: “You can shoot your shot, but nothing is guaranteed.”

While Joshi has seen several lowball offers on listings, she believes that the success of this strategy will depend on the seller’s motivation. And you risk offending the seller.

“It’s not something you can plan for; if that seller has already purchased a home or needs to relocate due to family circumstances, they’ll probably sell for less than market value and are more likely to accept a lowball offer,” Joshi says.

“However, if the seller is in a position where they don’t need to sell again, lowballing can be risky.”

For prospective buyers who are unsure whether now is the right time to buy, Lorry Greenspan, an agent with Forest Hill Real Estate, says, “the best time to buy is now, and long-term real estate is a very stable investment.”

“You can look back in time and almost always guarantee a return on your investment in Canada if you buy real estate long-term,” he says.

Buyers should define their key objectives as clearly as possible, and Greenspan recommends researching trends to see what the city’s up-and-coming neighborhoods are for “opportunities outside of where everyone else is looking.”

If you’re selling

If you’ve decided to sell, Greenspan advises selling now and selling quickly.

“Get it done as soon as possible.” There is no need to delay. It’s not like a year ago when we thought the longer you waited, the more valuable your property became,” he says.

Papaioannou advises sellers not to wait any longer than necessary.

“I don’t see things improving this year.” “At best, we’ll flatline, but I don’t see prices rising again next year,” he predicts.

According to Joshi, the most important thing for sellers to do is to be realistic about pricing.

Because the pool of buyers is small and property values are uncertain, Joshi recommends researching the area you’re selling in and comparing how many properties have been listed in recent weeks.

“Things have evolved. “Sellers and their agents must be crystal clear on the value of their property and then price it accordingly,” she says.

“Because the overall buyer pool is small, it’s unlikely that you’ll find someone willing to pay top dollar.” Pricing a listing higher or expecting higher offers may lengthen the time it spends on the market.”

Greenspan warns that aggressive pricing may result in sellers “shooting themselves in the foot.”

“If a house is worth $1 million and a seller becomes aggressive and tries to sell it for more, they may not receive that offer.” The house is then on the market for 30 to 60 days. “They then relist it and end up selling it for less because the market thinks there’s something wrong with the property because it sat for so long,” Greenspan says.

“It’s a scenario that’s come up a lot recently.”

Because there may be a lack of buyers, Greenspan advises against using the “offer night” strategy, which involves listing a home below market value to entice aspiring buyers into a bidding war.

However, he suggests that a seller try a “hybrid strategy,” in which they list a property slightly below market value and, instead of hosting an offer night, list it with “offers anytime.”

“You might get lucky and get multiple offers that come in at the same time by starting a bidding war without having an offer night.” But I wouldn’t recommend it right now because the market is much colder than it was in January or February,” Greenspan says.