Realtors are looking for the crazy competition to continue in Toronto's real estate.
Is 2017 the year that the sizzle starts to sputter on the Toronto region's overheated real estate market?
That's possible, says John Pasalis, of data-digging brokerage Realosophy near Queen and Leslie Sts.
"As the craziness continues, I suspect that might trigger some bigger changes," he said in reference to government measures already implemented this year such as more rigorous stress testing of lending qualifications.
"I suspect that Ottawa or the province are only going to be fine with 30 per cent year-over-year appreciation (in housing prices) for so long before they do something else that's drastic," he said.
Here's what other industry experts are predicting:
The inching up of interest rates and more stringent mortgage rules are among the factors that could play a role in tempering sales in the hot Toronto region market, says Jason Mercer, director of market analysis for the Toronto Real Estate Board (TREB).
Those influences could be enough for some households to put a home purchase on hold. But Mercer says most consumers will look for other choices in order to pursue their home ownership dreams.
"If you were thinking of buying a single detached home in Toronto, maybe now you're looking at purchasing in one of the surrounding regions or you're going to change both your home type and the geography you're looking for," he said.
The Trump effect
Bond yields have already risen, leading to those marginally higher mortgage rates.
But whether the inauguration of Donald Trump will ripple into the housing market is all part and parcel of the global economy, said Mercer.
"Obviously any factor that could affect the economy from a positive or negative perspective has to be taken into account," he said.
Tim Hudak, CEO of the Ontario Real Estate Association (OREA), which represents 40 real estate boards across the province, is optimistic.
"There certainly seems to be a view that the American economy will grow faster now," he said.
But that puts pressure on U.S. interest rates, which will force a decision around our own interest rates or letting our currency drop.
"Particularly in the GTA, real estate is a great investment. As the expression goes, we're not making any more of it," said Hudak.
Supply and demand
Industry sources agree that the lack of listings — resale and new homes —will continue to be the real estate story next year.
Mercer predicts that re-sale listings will continue to materialize at very low levels, driving up prices.
April Williams, broker of record at Royal Lepage Terrequity Realty, expects listings will be scarcer in 2017 than they were this year.
"I don't see a lot of people making lateral moves. With the closing costs and the cost of homes it doesn't make sense,” said Williams. “I think we're going to see a lot more people that are either up-sizing or down-sizing, which is going to keep the amount of listings low next year — which could create higher prices and more bidding wars."
The supply of new homes will also continue its decline, says Bryan Tuckey of the Building Industry and Land Development Association (BILD). There were 2,300 low-rise homes on the market in October compared to 4,000 in January, he said.
A lack of serviced designated lands means "our members are still struggling to get homes on the market," he said.
High housing prices are bringing condo lifestyles into the mainstream for more young families, says Matthew Slutsky of online development hub BuzzBuzzHome.
He expects to see more activity on the condo market with 29 launches and 131 scheduled completions expected in 2017.
The range of choice in the condo sector continues to grow, said Slutsky. He cites mega-developments like Rogers' M City in Mississauga — 6,000 units in 10 towers — and smaller, niche buildings such as the Museum Flts in Toronto's Junction Triangle.
Wise investors are also looking at older condos because they frequently offer more space.
"One of the beautiful things about a condo is that all the amenities can act as your living place," he said, adding that gyms and pools are features that have longstanding appeal to every type of buyer. There's a declining interest in gimmicks like bowling alleys.
New condos are also getting larger, says Tuckey. But that will also affect price.
Condo prices have gone up 10 per cent year over year.
"Over the years, some of the increased cost in land, construction and time were masked a little bit because sizes were getting smaller," he said.
Williams, who works out of Liberty Village, says she's already seeing a demand for those larger units.
As well, she said, more clients are looking for outdoor space and a view.
Proximity to the subway is also increasingly important as parking and congestion become more expensive and time-consuming, she said.
Two or three years ago the record number of condos under construction and the completions coming down the pipe might have raised concerns about inventory, said Mercer.
But if there were fewer units on the market, the Toronto region might have pushed the high-rise segment to be as tight as the market for detached, semis and townhomes, he said.
Price growth in the condo field also "speaks to the strong first-time buyer activity we continue to see in the city of Toronto and the surrounding region," he said.
Competition for homes
New lending rules this fall have slowed things down, said Royal LePage agent Desmond Brown, but competition is still alive and well among buyers vying for the same property.
The difference, he said, is that instead of 10 offers, the seller might be looking at six or eight.
But as 2016 draws to a close, Brown said he's seeing more conditional offers being accepted and some properties are sitting on the market a bit longer.
"In the million-dollar range and under it's still pretty busy," he said.
But he added, "We're not really sure what's going to happen in January and February, which has been really busy over the last five years. People just might be exhausted."
With the new mortgage stress tests introduced by Ottawa in October, Brown says he's already seeing fewer of the first-time buyers that fuel the market.
"We've had a couple of deals fall apart because the buyers thought they were qualified for a certain amount of money and then the new mortgage rule came in and we were in the middle of an offer and they found out they didn't qualify for as much as they thought they had," he said.
If somebody qualified for $650,000 they're only qualifying for $500,000 under the new rules, said Brown.
"I have a lot of potential buyers who would love to get in the market and we're hoping things will stay the same as they are right now where it gives them a chance to go in and negotiate," he said.
But among first-time buyers, Brown says there's a growing understanding that they have to be realistic. Some are looking at income properties that help them carry the mortgage.
They're understanding, he said, that a starter home isn't necessarily going to be your dream home.
In some cases that means looking outside their preferred neighbourhoods, said Williams.
Even with the help of government measures such as the doubling of the provincial land transfer tax rebate for first-time buyers, it's a tough entry-level market, she said.
"I feel like the odds are stacked against you,” said Williams. “You are seeing more and more parents help their kids but not everyone has that ability."
In new home sales, Tuckey said, "Town homes have become the new single.
"They're the living style that people are pleased to be in when they have families and want to try and be a little closer to the ground," he said.
He predicts that builders will continue to innovate with more stacked, back-to-back and smaller townhomes to make them affordable.
Those townhomes will house more people in the region particularly as Queen's Park moves ahead to update its growth plan to create a denser region.
Home buyers and the industry have to start to focus on the housing supply that will necessarily be part of that density.
While the effects of the first iteration of the growth plan have yet to be felt, home builders are counselling the government to take a measured approach in newer denser intensity targets.
"This is our new normal and I'm not sure people in Toronto understand that," said Tuckey.
"The province wants intensification to be part of the future and that does put pressure on existing communities," he said.
OREA's Hudak says the provincial land policies that are feeding denser development are for "well-intentioned environmental reasons." But, he said, the pendulum has swung too far.
"You've really restricted land use in the GTA until you have more people who are chasing fewer houses and that's forcing price increases," he said.
"It's certainly very clear from our data that we need to get more housing options out there for people, particularly for first-time home buyers, added Hudak.
“There's a lot of people who are interested in moving into the GTA from Ontario or internationally,” he said. “That's a sign of economic success and potential. We're just not building enough homes for them.”
Two other policy changes on the horizon: a development charge review could add another cost for homeowners and inclusionary zoning requiring developers to set aside some new units for lower income households — if done improperly — could make all housing more expensive, said Tuckey.