Where are the Multiple Offers in the Toronto Market?

25 December 2013

The media tends to sensationalize multiple offers – especially when the sale price goes a hundred thousand over list. The truth is, very few properties experience a bidding war, except for one particular property type. That property type is a resale freehold (you own the land and structure, so it can be a semi, row or detached house) located within the 416 area code. With more and more people wanting to live downtown, there is already an existing built up demand. Finally, it must be listed at and sold for less than a million dollars! So why is this type of property in such high demand? Again we can thank all levels of Government for interfering with market forces. First the City of Toronto introduced a second land transfer tax, payable by the buyer. You would think it would slow buyers down. Just the opposite. It has abnormally reduced the number of properties for sale. Why? People who already own, have figured out that they can save these taxes if they stay put and renovate, rather than move to a bigger property. Next the Federal and Provincial HST on new house purchases – the rebates disappear at $450,000 make it far more attractive to buy resale. Finally CMHC no longer insures any properties over one million dollars. That means anyone buying over this amount must put down at least 20% and get a conventional mortgage. That is a lot of money to save. And to top it all off, mortgage interest rates charged by banks are now higher on conventional mortgages than on CMHC insured mortgages where you actually put less money down. Go figure. So when you add up all the factors at play, there is only one type of property that makes the most sense to people wanting to live downtown Toronto: resale freeholds under million. The end result is that these properties attract Multiple Offers.