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The Luxury Home Market is Back

The Luxury Home Market is Back

Carolyn Ireland of the Globe and Mail interviewed Elli as part of her fascinating article on current trends in luxury real estate in Toronto. It is hard to imagine, but even in the multimillion dollar price range the supply cannot keep up to the demand. Read on to find out what happens when these distinctive homes go on the market.

Published in The Globe and Mail, Carolyn Ireland, 31 January 2014

On a snowy day in Rosedale last week, luxury cars lined the antique cobblestones in front of a neoclassical Georgian, and guests lingered near the warmth of a log fire in the main entrance hall.

Five Hawthorn Gardens had just hit the market with an asking price of $15.9-million and real estate agents were eager to view the splendours inside.

Welcoming agents to the busy open house were Elise Kalles of Harvey Kalles Real Estate Ltd. and Jimmy Molloy of Chestnut Park Real Estate Ltd., who share the listing on the ravine property. They started receiving requests for showings as soon as word got out that the house would be hitting the market.

Agents say sales in the upper echelons of the market in Toronto are lively again after a moribund stretch that began in 2012.

Ms. Kalles believes buyers were hesitating as economic pundits warned of a possible downturn. But when a few buyers stepped up, a spate of “sold” signs appeared in areas such as Forest Hill, Rosedale and Teddington Park. Those deals bolstered confidence and spurred others to take action.

“These are landmark houses,” Ms. Kalles says. “It’s not like if this sells you can tell a client, ‘don’t worry – another one will come up.’”

Ms. Kalles recently sold a house on Riverview Drive for close to its $15-million asking price. A week ago, she represented prospective buyers who lost out on a house on Roxborough Drive in Rosedale. The house, which will likely be torn down, was listed for $1.9-million and drew four competing bidders.

Looking back to 2012 and 2013, many luxury properties languished as a list of global observers that included Deutsche Bank, the Organization for Economic Co-operation and Development, the International Monetary Fund, the Economist magazine, the Wall Street Journal, and marquee economist Nouriel Roubini all warned of frothiness in Canada’s housing market.

“I think that we had a lot of people who were sitting on the sidelines,” says Mr. Molloy. “People have been waiting for this correction. The correction never came.”

Mr. Molloy also reckons that the market has adjusted to the tighter restrictions on lending imposed by the federal government in July, 2012. Among other interventions, Finance Minister Jim Flaherty clamped down on high-ratio mortgages of more than $1-million as market watchers fretted about perilous levels of household debt.

Although corporate titans and entrepreneurs can often afford to pay cash for their high-priced real estate, many took out mortgages in years past to take advantage of low interest rates and maintain their investment in assets offering a higher return, Mr. Molloy says. “They had the money, but they had better uses for the money.”

Buyers have now absorbed the change and are taking some profits out of financial markets and shifting cash into property, he said. Still, he doesn’t see the upper end of the market getting overheated.

“When you’re dealing with that higher end, every deal is done prudently. Deals are being done at a high level, not a crazy level.”

He adds that people who want to live in great downtown neighbourhoods don’t have a lot of choice in listings. “There’s not an overwhelming supply of great product. There are people with $2-million or $3-million to spend and they’re frustrated.”

Sotheby’s International Realty Canada says that sales of Toronto homes of all types in the $2-million to $4-million range rose 17 per cent in 2013 compared with 2012. For houses above $4-million, sales swelled 52 per cent in the same period.

Ross McCredie, chief executive of Sotheby’s International Realty Toronto, says that a lack of listings in the single-family home market have made “attached homes” more popular and he predicts that trend will strengthen in 2014. Mr. McCredie believes condos, townhouses and row houses will see bidding wars as we head into the spring market.

In Leaside, meanwhile, workers are still installing the kitchen and nailing down the trim in a traditional, red brick house on Hanna Road. As soon as real estate agent Patrick Rocca placed a photograph with the words “coming soon” on his web site, he heard from prospective buyers.

“I’m getting people calling me about it and it’s not even finished. I don’t even have a sign on it yet.”

The asking price will be somewhere around $2.3-million.

In the past 10 days, Mr. Rocca says, he has sold two houses with asking prices above the $2-million mark and both received multiple offers.

One of the properties, near Edwards Gardens, received six offers and sold for more than $50,000 above the asking price.

Mr. Rocca believes one reason is that inventory shrunk after builders slowed down their rate of new construction. Last fall, he says, 17 or 18 houses priced north of $1-million were on the market in Leaside.

When people drive by lots of houses for sale and see them sitting, they become more hesitant to buy because they figure they might be able to hold out for a price cut. Houses are no longer sitting, and that boosts confidence in the market, Mr. Rocca says.

“You’re starting to see movement and, in some cases, really crazy movement. People are picking up that the high end is moving now.”

Real estate agent Elli Davis of Royal LePage Real Estate Services Ltd. has tallied nine deals in January and many of them were at prices above $2-million.

One house she sold this week in Forest Hill had previously been listed at a much higher price. The buyers were able to negotiate a price about seven per cent below the asking price and about 30 per cent below the original asking price with a different agent. She’s not seeing a lot of price cuts, but she says some sellers are unrealistic when they set the listing price.

“Ironically, she says the recent vigour in the market has made some homeowners more reluctant to list. “Now we’re getting seller resistance because they’re afraid they won’t be able to find anything to buy.”

In more moderate price ranges, multiple offers are continuing to amaze sellers, Ms. Davis says. This week she sifted through 24 offers on a semi-detached house listed for $499,000 near Leslie and Finch. The successful bidders paid $640,000, or $141,000 above asking.

Over three days, she had more than 150 showings, says Ms. Davis.

“I was getting calls all weekend, so I knew it would be very, very busy.”

Ms. Davis says the lack of supply in January is one reason that sellers get so many parties vying for one house.

“I really think that people have to realize that January and February are excellent months to put your house on the market.”

People who wait until the spring have to contend with the surge of listings that come out in April and May.

“The weather’s nicer but that doesn’t mean you can’t sell swimming pools in January. You just put photos out and let people dream.”

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