‘Perfect cocktail’ of public sentiment adding to supply issues, but some realtors say notorious drought may end this spring
GTA’s winter real estate market isn’t necessarily known for its competitive nature. But this winter, there is certainly competition in the air. It’s not necessarily that a crush of buyers are flooding the market, although you could argue there is some of that happening. But rather, the competitive nature of today’s landscape is being fuelled by historically low inventory levels that continue to persist.
Since the start of the COVID-19 pandemic, GTA condo listings peaked in October 2020 with a total of 8,428 units on the market. But inventory levels have been on the decline ever since. The month of January, for example, saw a total of 1,415 condo listings. Compare that to the 3,811 units available in January 2021 — a 63% drop in inventory over just 12 months.
So you’re probably wondering, why exactly is inventory so low?
Well the answer to that largely lies in the current, overarching sentiments among both buyers and sellers.
For starters, sellers don’t want to list their properties right now in the dead of winter. Unless a seller has no choice — they’re usually advised to wait until the busier spring market, rather than list when homebuyers are in hibernation.
Meanwhile, ongoing concerns over COVID-19 variants is another reason why sellers are largely holding off.
“Omicron is still dominating the headlines, so some of my seller clients are closely monitoring how ongoing restrictions may impact the market,” says Strata.ca realtor Milan Mitrovic.
“And then there are others who don’t want to list because they’re simply uncomfortable with people walking through their home when infection rates are still high,” he adds.
“Whatever the reason, Omicron is making people think twice about listing, which is driving down inventory rates even further.”
When it comes to buyers, much of the sentiment there is dominated by FOMO, otherwise known as a ‘fear of missing out’. The message that many buyers are hearing is that interest rates may rise this year, so they better purchase something before getting priced out.
But the reality is that interest hikes tend to be very minimal, and historically we do not see increases above a quarter of a percent.
Regardless, the GTA is seeing an influx of buyers who are being pushed into the market, largely driven by a ‘now or never’ mentality. And as mentioned earlier, there are hundreds of potential sellers who feel there’s just no good reason to list at this time.
These competing sentiments are essentially swirling together to create a ‘perfect cocktail’ exacerbating the current inventory phenomenon.
This lack of listings is likely what’s driving an overall pricing surge across the GTA.
In October 2020, prices had dipped to their lowest point since the start of the COVID-19 pandemic. At this time, units were selling for an average of $678 per-square-foot (PSF). But since then, prices have been rising rapidly with a condo now costing an average of $910 PSF, an increase of 34% in just 15 months.
Although it’s unclear whether prices will eventually plateau, one thing is certain: Persistently low inventory levels will only exacerbate the issue.
Still though, many of us at Strata.ca are optimistic that we’ll see a dramatic uptick of new listings in the next couple of months.
“I suspect we’ll see a lot of new inventory in March as sellers look to cash out during the busy spring market,” says Mitrovic, who’s also hopeful that competition won’t be as fierce, since all those buyers with FOMO are actually in the market right now.
“Many of those buyers will have purchased something and exited the market by spring, leading to less competition and a fairer playing field overall.”