Omicron COVID-19 variant likely to add fuel to real estate fire, realtors say

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The Toronto-area real estate trends that have fueled a run-up in prices since the coronavirus pandemic began are likely to intensify in the early months of 2022 with the wave of infection caused by the Omicron variant, agents say.

Andre Kutyan, a broker with Harvey Kalles Real Estate Ltd., predicts that the first quarter of 2022 will look much like the fourth quarter of 2021 in the carriage trade segment of the market. People who are more inclined to stay home want to do so in comfortable surroundings.

“I think Omicron is just going to fuel their desire to improve their living space.”

Mr. Kutyan believes a lack of inventory will continue to constrain the real estate market in the Greater Toronto Area this year.

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The average price of a property in the GTA jumped 17.8 per cent in 2021 compared with 2020, according to the Toronto Regional Real Estate Board (TRREB). The average price of a detached house in the 416 area code rose 16.2 per cent in the same period.

TRREB chief market analyst Jason Mercer notes that tight market conditions prevailed and that lack of inventory pushed prices higher.

Mr. Kutyan stresses that the increase across the broader market hides a lot of the variation in various houses and pockets of the city.

“There’s going to be a reality check for a lot of sellers – especially at the ultra-high end.”

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Mr. Kutyan says buyers are willing to pay a premium for additional space as they work from home and their kids attend school online. Society is back in partial lockdown and buyers who have the means to do so want to stretch out.

Many of his clients in the upper echelons of the market work in occupations that have not been hurt by the pandemic. Those who borrow in order to pay for a larger property are enticed by interest rates at historic lows.

“These are all move-up buyers. They want their dream home now.”

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Mr. Kutyan says these trends are fueling demand for properties in neighbourhoods such as Lawrence Park, Lytton Park, Forest Hill and Rosedale. The area around Bayview and York Mills, where a surplus of properties sat on the market before the pandemic, is seeing huge demand today.

Rashi Narula, a real estate agent with McCann Realty Group Ltd., helped clients finalize a deal for a six-bedroom house on New Year’s Day.

The purchasers of 165 Teddington Park Ave., paid $9.16-million for the Georgian-style house after it was listed with an asking price of $11.995-million in the summer and lowered to $10.98-million in the fall.

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Ms. Narula says the real draw is the 100-foot-by-187-foot lot surrounded by mature trees; the buyers will likely tear the three-storey house down.

The buyers, who have been looking for more than two years for a finished house in price segments between $20-million and $25-million, could not find one that suited them, Ms. Narula says.

“We figured out that it is probably best they build their own house,” she says. “They have a big family. They want to be on a big piece of land.”

Teddington Park appeals to the large family because they need room for both parents to work at home and older children to study online.

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“They need not just bedrooms for them but school spaces for them and work spaces,” she says.

Ms. Narula put the first offer on paper near the end of October. The two sides negotiated until Jan. 1.

Ms. Narula says many properties she sees in the $5-million to $10-million range are selling with multiple offers.

In one case, clients were interested in a heritage home in Rosedale that was being quietly offered off-market in the $10-million range. Ms. Narula figures the house needs an additional $5-million to $6-million in renovations.

While her clients were deciding on an offer price, the house sold.

“Somebody else walked in and scooped it with no questions asked,” she says.

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Another property in Forest Hill with an asking price of $8.5-million received four bids, including one from Ms. Narula’s clients, who missed by a small margin.

Ms. Narula says the common theme is that move-up buyers are looking for more space and they are not inclined to wait on the sidelines.

“They want to lock in as soon as possible,” she says.

Meanwhile, Mr. Kutyan says, houses in Yorkville and other downtown luxury neighbourhoods appeal to a smaller pool of buyers in the current landscape because they offer less room for a family. The downsizers who wanted to move to a condo unit or semi or townhouse in the core have put those plans on hold.

“It’s a tale of two markets,” he says, with move-up buyers driving more of the sales than empty nesters.

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Towards the end of 2021, Mr. Kutyan sold a two-bedroom semi-detached house at 23 Lowther Ave. for $6.3-million after first listing the property with an asking price of $6.6-million and then reducing the price to $6.398-million.

Mr. Kutyan worked with the sellers when they purchased the property in 2020 for $6.25-million. By the time they paid transaction costs, they lost money on the trade.

“Certain types of properties are not appreciating the way others are.”

Mr. Kutyan represented buyers who submitted an offer for a house at 36 Berryman St., on Nov. 30. The two sides then wrangled for the next three weeks.

“I finally got an accepted offer on Dec. 21,” Mr. Kutyan says. “It was a lengthy, drawn-out negotiation.”

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The detached house was unusual for the neighbourhood because it is a newer house with a garage, Mr. Kutyan says. The property was listed with an asking price of $7.55-million in 2020, then relisted in 2021 for 125 days with an asking price of $7.45-million.

“My clients saw it, loved it, but were not interested in paying seven,” he says.

Mr. Kutyan says the seller and buyers were dug into their positions.

“Verbally we were $25,000 apart on a $7-million deal and no one was willing to budge,” he says. “They have one mindset for what they’re willing to sell for and another mindset for what they’re willing to pay.”

Eventually the two sides agreed to a deal at $6.95-million.

To Mr. Kutyan, both sales show that there are deep-pocketed buyers who want to live in Yorkville, but they represent a smaller niche. Sellers, meanwhile, believe they can hold out for the price they want – especially if they have the only house listed in the area at the time.

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What sellers need to grasp, Mr. Kutyan points out, is that if there are 10 buyers who can afford a house in the $7-million range, nine of them will choose to buy a detached house on a large lot in an area where they will gain more space.

In the region of York, north of Toronto, there’s plenty of room to spread out, but sellers with asking prices in the upper echelons are also trying to draw a limited cohort of buyers.

Mr. Kutyan points to one property which is listed well above $10-million. The house has been sitting and the homeowners have been asking agents to evaluate the reasons why.

“There’s nothing wrong with the house – it’s your price,” Mr. Kutyan told the sellers. “When it’s been on the market for eight months and you haven’t found a buyer, the market’s telling you something.”

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Mr. Kutyan says buyers with such a hefty budget have their pick of neighbourhoods. While sales in areas such as Vaughan and Markham are on fire in the $1-million to $1.5-million range, it becomes harder to find a large group of buyers in the luxury segment.

The buyers who would typically spend $10-million in York tend to be those who have a business in the area or family nearby.

“Somebody has to want to live there and spend that kind of money,” he says.

This week, Mr. Kutyan listed a four-bedroom house at 68 Dawlish Ave. in Lawrence Park with an asking price of $6.495-million.

While there are very few listings in January in a typical year, he knows that buyers are still circulating.

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