The Toronto real estate market in 2023 has been full of drama!
For the first 5 months of the year, more and more people were stepping on the gas pedal and the market was heating up again.
Then suddenly, came the surprise rate hike in June.
Everyone hit the brake.
Then came another rate hike in July.
Now, it is a U-turn.
Sales volume started to trend down again with prices still staying more or less flat.
That’s pretty much the market update based on data.
So I’m going to do a different kind of market update this time.
I’m ready to share my own market insights based on what we see day to day on the front end.
It is going to be a lot more interesting than cold data.
If you like this kind of market insights, you gotta subscribe and hit the bell now.
Yes, the market is very sluggish, but there are still transactions going on every day.
So who’s selling?
And where are the buyers coming from?
Let me break it down for you.
There are 2 types of sellers and 2 types of buyers who are in the market right now.
Seller #1 Assignors
They typically bought a pre-construction unit 3 to 4 years ago.
In the current market, they are not seeing a big appreciation.
Yet, they have to pay the final closing bill and carry a mortgage at a very high interest rate.
So they are very eager to offload.
The majority of them are willing to assign at the original price from 3 to 4 years ago.
They just want to get their money back and not worry about a mortgage.
Seller #2 Landlords
With the high interest rates, the monthly expenses for landlords would increase big time.
You might think a majority of the landlords would want to offload as well.
But there are 2 key differences between the current landlords and assignors.
Number one, for landlords who own the unit for more than 5 years, they are sitting on a very nice appreciation.
And the rent has also increased big time.
A one bedroom unit in downtown Toronto is now starting at $2,400.
These landlords are willing to chip in a few hundred dollars per month to keep the property running, not ideal.
But they are okay going through a bit of a rough time because overall it is still a big win for them.
The second major difference between the assignors and the current landlords is the mortgage rate.
Some landlords who plan to hold their properties for long term are locked in to fixed rate mortgages at the low interest rate.
So they are not really affected by the rate hikes, or at least not yet.
In fact, they are actually earning more because of the rent increases.
Here comes my exclusive data point.
We have over 500 units in our rental management program.
What’s the percentage of the units that are currently trying to sell?
Take a guess.
Comment below and let me know.
The answer is 2%.
Only 2% of the landlords are trying to sell.
And I can tell you that most of them are not desperately selling, they are just trying out the market to see if they can get a good price.
That’s also a reason why you don’t see prices coming down a lot.
Of course, there are end-users selling too, but they are usually selling for personal reasons when they must sell regardless of the market conditions.
So who would be buying in the current high interest rate environment?
Buyer #1 End Users
They are the most active buyers.
Just 2 weeks ago, our end user client won a 3 bedroom unit with unobstructed lake view in downtown Toronto for $1.22 million dollars, from a multiple offer situation.
Yes, interest rates are high, but end users are taking advantage of a quiet market without fierce competition.
And most important of all, they believe that prices are bottoming out in the next few months.
There may be a final rate hike coming September.
If so, prices may slide down maybe 1 to 2% more, and that would be the best time to buy.
Otherwise, things will stabilize and turn around.
So they better buy before the market gets busy again.
You see, either way, end users see the next 3 months, from September to November, as the best time to buy.
Buyer #2 Investors
Investors are still in the market, but very passively.
They are just looking for deals, like assignments below the original price.
Are you still in the market?
Which type of seller or buyer are you?
Comment below and let me know.
Schedule a call with me at the link below if you are looking for deals.