16 Feb Market Notes: Understanding the pricing dynamics downtown
The market continues into mid-February with very few new quality listings. This is making the current market very competitive. The market for houses, condos and hard lofts under $1m is where the strength lies today. The market over $1M is more balanced. As such, pricing tactics are evolving. Homes that would typically sell for well over $1.0m ($1.2m) are being priced around $899K to draw in the stockpile of buyers with budgets under $1m. This pushes the number of offers up and thus the interest level on offer night. The seller is diminishing the negotiating opportunity of the real buyers by leveraging interest from people who can’t really afford the property.
One example of this can be seen in a Candy Factory loft that sold this week. Listed at $899k, it sold for $1.2m. The smart money knew the value of this condo was around $1.1m. The agent wisely used the inventory of rabid buyers under $1M to push a property easily valued over $1m much higher.
Obviously, this has been happening in Toronto real estate for years and will continue to happen in certain segments of the market. I am sure many of you were hoping to see less bidding wars this year and more opportunity to negotiate, but don’t count on it if demand continues to outstrip supply. Instead, I am seeing homes more significantly underpriced, teasing the market into believing homes are more affordable. My point last week on this becoming a quality driven market as opposed to a price driven market is top of mind.
It is more important then ever to understand the pricing dynamics of downtown Toronto real estate. It may never be cheap, but understanding where that value exists will give you a leg up over the people running from viewing to viewing, offer to offer.
-Nick, Feb. 16/2017