Picture it: A client is ready to make an offer on a condo. We’ve done our due diligence and are putting together the paperwork. Suddenly, the client says:
“I’m nervous about what’s going to happen in the Toronto real estate market. Everyone keeps talking about a correction of 10%. So while I understand what condos in the building have been selling for, I want to pay 10% less than the last sale.”
We’ve actually had this conversation with clients a few times in the last few weeks.
Unfortunately, none of us have a crystal ball. We have seen more room for price negotiation in the last month due to an increase in supply of condos – so I’m certainly not suggesting that things haven’t changed. Today’s realities of increased supply and buyer nervousness need to be factored into the price. But if you’re making an offer today, it’s going to be almost impossible to convince a Seller to take less than today’s market value. Why would they accept a lower price because a Buyer is speculating that the market is going to go down?
If you’re making an offer on a condo in Toronto these days, here’s what you need to know:
- There’s more supply – which should translate to more negotiation power. If you can’t reach an agreement with one Seller, you could easily move to the condo down the hall and offer them something similar.
- Condos seem to be staying on the market longer – and by longer, I mean 30 days (that’s just a guess, official numbers for August haven’t been released yet). If the condo you’re interested in buying has been on the market for a long time, the market has spoken: the price is too high. Then again, we listed and sold a condo in Liberty Village in one day 2 weeks ago, so some condos and locations are still selling like hot cakes. (does anyone even know what a hot cake is?)
- Comparable sales of the last two months are the most important – don’t look at prices from a year ago. Sales that happened in 2012 during the summer are the most relevant.
- Sellers are nervous too – but they aren’t stupid. They aren’t going to take 10-20% off their price because an economist said that’s how much prices are going to go down. And for every economist who thinks prices are going to go down, there’s another one who says they won’t. There are still plenty of buyers out there for good condos in good locations.
- If you’re convinced that prices are going to significantly decrease and you don’t want to pay today’s prices, then wait to buy. It might be a year, or it may never happen. And as we always say, timing the market is dangerous.
- If prices go down, it only matters if you have to sell. If you’re planning on staying in your condo 5+ years, buying today means building equity, not paying rent and living in a place you love. Markets will do what they do – the key is not getting yourself in a position where you need to sell (which means not over-extending yourself).
- Unique spaces in great locations are always your safest bet. We don’t sell a lot of condo boxes – we sell a lot of unique condos, lofts and character spaces (and we own two of them too).
I watch what’s happening on the market everyday. I watch what people ‘Google’ when they land on my website and I track the kinds of calls and e-mails I get from Buyers and Sellers. Based on what I’m seeing, I actually think we’re going to have a good fall 2012 real estate market. Yes, there are a lot of cranes in the sky (I think the current number is 192 condominiums being built in the GTA) – but more than half of the buildings that have pre-sold 70% of of their units haven’t started construction yet. Builders do have the opportunity to limit supply. And Buyers and Sellers have the opportunity to influence what happens to prices too.