The most frustrated people in the Greater Toronto Area’s real estate market right now are clearly the buyers. Buyers and agents alike are having a difficult time understanding where prices are going to take them when putting an offer in on a home. Even the seasoned real estate agent is left scratching their head on some transactions.
With strong gains in price being shown in January (12%) and February (23%), compared to last year, individuals are left pointing fingers as to who is responsible for this increase. Most seem to believe that the foreign buyer is responsible for these increases to the market, adding more fuel to the fire for a foreign buyer’s tax. The Ontario Real Estate Association has come out strongly against this idea.
Buyers are coming in from all over the globe. It is not just countries in Asia (China, South Korea, Vietnam) who are looking a property in the GTA. European countries have also show interest in properties, along with Russia, Ukraine and even Cyprus. Even though they make up only a small subset of buyers, they determine market value. A term that’s circulating more often is the “marginal” buyer. These are the outliers who pay huge premiums over the “consensus price”. Prices are being set by that one buyer who blows everyone away.
With the competition coming from oversees GTA based families are the ones who could be missing out. Families are having to find alternatives to enter the market as prices have reached such levels that first time buyers are unable to purchase a home. When it is time to present offers, the competition is nerve racking. It’s time consuming and frustrating for families. You are not just seeing two people – there is an entourage of the extended family.
Once the home has been purchased. You are still not out of the woods. Prices have gotten so out of hand that it has been hard to get financing in some cases. There may be trouble when the bank sends an appraiser to make sure the property is worth somewhere near the selling price. If not, the buyer risks seeing their equity being underwater if the market corrects. This is where hiring an experienced agent is crucial in helping negotiate the right price for the property that is being purchased.
What Does This All Mean?
Markham, Unionville, Stouffville and Richmond Hill sellers have seen their prices remain strong with instances of aggressive offers ‘from that one buyer’. Sellers need to understand that although these well above asking offers do occasionally occur, they are not the benchmark in which a price is determined. A price is determined with an experienced real estate agent doing their homework and assessing proper value. Whether the buyer is local or foreign has little to do when an offer is presented at, above or well above asking. An experience agent will help navigate through the current minefield of potential issues one might encounter when purchasing a home in today’s market.