Prices and low inventory holding back sellers

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As buyers return with gusto to the real estate market in Toronto and surrounding areas, a lingering frustration is the lack of new listings.

The Canadian Real Estate Association reports that national sales jumped 11.3 per cent in April from March. By comparison, new listings edged up 1.6 per cent but remained at a 20-year low.

What’s holding those sellers back?

One cadre of homeowners holding onto their large houses is made up of baby boomers who would like to downsize but are having trouble landing their next spot.

Matthew Regan, a broker with Royal LePage Real Estate Services, says a large contingent don’t feel ready to move into a condo unit but they’d prefer a smaller house. Looking ahead to their later years, they’d ideally like a bungalow so they won’t have to face climbing stairs.

Ironically, the bungalows they seek have often been torn down to make room for the more spacious houses they live in now.

The result is that the demand far outpaces the supply when it comes to living comfortably on one level with a front door facing the street and a leafy backyard.

Mr. Regan, who does much of his business in the Mississauga and Oakville areas west of Toronto, sees the challenge in many upscale areas.

“The baby boomer population that own in desirable neighbourhoods want to unload these big houses,” he says. But if they hold onto them for another five or 10 years, their dilemma may worsen.

Mr. Regan points to the example of a three-bedroom bungalow he sold off-market in the Lorne Park neighbourhood for $2.55-million.

A two-storey in the same area would sell for the same amount or less, which is hard for many owners of larger homes to grasp, he says.

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Many find it confounding that their home with more bedrooms and perhaps 1,500-square-feet of added living space doesn’t fetch more.

“The bungalow is a coveted product,” he says. “That demand has been brewing.”

It’s also a shock to some homeowners that the bungalow they are looking to purchase may actually cost them more than the larger home they are leaving.

Mr. Regan says some owners who are reluctant to sell a current property until prices recover to the level of the February, 2022 peak are actually losing ground.

“Sellers may get their price but it’s going to take a long time. The bungalow is going to keep going up at a faster pace than their current home.”

He advises people in that cadre to keep an eye on the demand for the type of place they’re looking for.

“Who else wants this asset?” is more pertinent than how large or small the building is.

In the upper echelons of the market, large condo suites can be hard to come by in downtown Toronto, says Andy Taylor, a broker with Sotheby’s International Realty Canada.

“There’s very small inventory in luxury buildings,” Mr. Taylor says. “Once people move into them, they typically stay there.”

Mr. Taylor recently listed a 6,000-square foot suite at the Residences of the Ritz-Carlton Toronto with an asking price of $23.5-million.

To appeal to buyers with deep pockets, the owners of an entire floor at 183 Wellington St. W. decided to combine two of the four units to create suite 4602/03, reconfigured by Crayon Design.

“Builders didn’t build a lot of 4,000-square-feet and above,” Mr. Taylor says. “They rarely come on the market but there is demand.”

The suite above the five-star Ritz-Carlton Hotel includes three bedrooms and five bathrooms, an art gallery, and views of the city to the north and Lake Ontario to the south. Residents also have access to the perks and amenities of the hotel.

The suite could appeal to downsizing Toronto-based homeowners, Mr. Taylor says, and the team will also market the suite internationally to finance mavens in New York and Boston and tech entrepreneurs in Palo Alto, Calif.

Buyers moving to Toronto for work or business reasons may be eligible for an exemption from the foreign buyers’ ban, Mr. Taylor points out.

In the Yorkville neighbourhood, Mr. Taylor has listed a two-bedroom suite at Museum House with an asking price of $4.85-million.

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The living room and terrace of the 2,206-square-foot suite sit directly across from the Michael Lee-Chin Crystal at the Royal Ontario Museum.

The building at 206 Bloor St. W. offers a 24-hour concierge and valet parking.

In Toronto’s west end, real estate agent Luke Dalinda of Royal LePage recently listed a suite with 4,022 square feet of living space and views of Lake Ontario, the city skyline and High Park.

Suite 3501 at One Palace Pier Court is listed with an asking price of $3.488-million.

Mr. Dalinda says the owners were empty nesters who lived in a large estate home and decided to move to the tower in 2007. They purchased two suites and merged them to create one unit with three bedrooms and four bathrooms.

The building sits on five acres of grounds and includes such amenities as valet parking and a health club.

In the broader market, Farah Omran, economist at Bank of Nova Scotia, has been expecting a stabilization in housing activity and an eventual uptick in demand and prices. She points to pent-up demand and strong immigration, combined with limited supply, as factors contributing to the shift.

“As buyers see signs of an increase in activity and prices, they are enticed to rush back to the market before prices go up any further, in turn adding more pressure,” Ms. Omran says.

Looking ahead, Mr. Regan expects sales to remain steady through the summer.

Some houses are selling with multiple offers in the suburbs but setting an offer date remains a risky strategy.

During the pandemic mania for more space, the mindset of many buyers was that they needed to buy the first big house that came up in a neighbourhood they remotely liked.

“Now they can be more picky,” he says.

Even properties that sell with multiple offers are not going for astronomical prices compared with the run-up during the pandemic, he says.

“That’s a good thing. The pricing in 2021 and into 2022 made no sense. The fundamentals weren’t there,” he says.

Mr. Regan notes that people who sold in 2021 with a plan to buy back into the market at a lower price waited too long in many cases and now they’ve missed the recent bottom.

“Time out of the market is a dangerous thing,” he says. “The best thing you can do is run your own race.”