A for sale sign is displayed outside a home in Toronto, in December, 2021.Carlos Osorio/Reuters
With the average home price in the GTA down since last year, Toronto’s market is largely a buyer’s market. But while three-quarters of neighbourhoods in the GTA are underbid, there are still a few hot areas that tend to go above the asking price.
Experts say this phenomenon comes back to location and affordability. Cozy, semi- or fully detached character homes in the top five overbid neighbourhoods of Little Italy, Davenport, St. Clair West, The Danforth and The Junction remain relatively affordable at around $1.3-million to $1.8-million. They also benefit from being near great school districts, transit, restaurants, nightlife and amenities.
“Those well-connected neighbourhoods, [are] a little bit further, but still very urban and desirable,” said Benjy Katchen, president and CEO of Wahi. “Because there’s still so much demand for those, sellers are pricing it so that they can get a bidding war.”
As such, listing below market value is a strategy to attract multiple offers.
“The list price is just a marketing number,” said Ralph Fox, broker of record and founder of Fox Marin Associates, which specializes in the sale of luxury homes. “It’s really to entice interest and activity on the property, to bring in multiple offers to help drive the price up.”
These bidding wars operate similar to a blind auction where buyers put in their best offer, explains Kori Marin, broker and founder at Fox Marin Associates. Sometimes, offers can come in that are $200,000 apart, and the seller needs to decide which offer they would like to accept based numerous factors that can include price, conditions attached to the offer, the deposit, the closing date and sometimes even a personal letter.
Despite the bidding wars, Mr. Katchen says that, given that homes are usually listed below market value to provoke a bidding war, while homes sold in these neighbourhoods are the most overbid, they’re not necessarily overpriced.
“Toronto’s market is a very efficient market,” he said. “Things are going for probably around what they’re worth.”
On the other hand, luxury neighbourhoods like Lawrence Park and Forest Hill were reported to be the most underbid.
“There’s been a huge pivot to affordability,” Mr. Katchen said. “I’d say there’s a little bit more steam in more affordable neighbourhoods, and a little bit of steam has been coming out of the more expensive neighbourhoods.”
Similarly, Mr. Fox said that properties in suburban areas outside the city are having trouble selling.
“It’s very much a tale of two markets when it comes to low-rise, inner core, desirable character homes in good locations, versus the outer properties, which are really struggling,” he said.
While prospective buyers remain interested in affordable urban neighbourhoods that can offer more traditional homes with a backyard, current market activity is lower than what people were expecting before uncertainty with the United States and tariffs began.
“Everybody was expecting that this spring was going to be a very boisterous market,” Mr. Katchen said. “There’s still sales happening, but it’s more of a lukewarm market.”
He says that buying a home and taking out a 25- to 30-year mortgage is “a bet on the future.” People don’t want to make these bets when they don’t know what will happen politically, if they’ll lose their jobs or what their income will be like in the coming weeks or months. Sellers have a similar mindset; they’re nervous about whether now is the right time to list their home.
“All of these things outside of the market have heavily influenced sellers’ confidence before they go to market, no matter what price point or asset type they have,” Ms. Marin said.
However, sales in the hot top five neighbourhoods shows that there is still lots of demand.
“You never want to underestimate how much money is in Toronto,” Mr. Fox said. “No matter what is happening in the greater world, from a macro perspective, demand for these types of homes continues to remain strong.”