Demand for houses is falling in Toronto as more prospective homebuyers turn to condos — which are relatively more affordable — as their first choice. Among those taking a hit? Speculative buyers of detached homes, who are facing the prospect that their enterprise won’t turn a profit anymore.
On Wednesday, Twitter user @dima_nomad posted screenshots of real estate listings in Richmond Hill and North York. Each of the listed houses had been sold in late 2017, after having been off the market for only several months — or in one case, slightly more than two years.
The short periods between sold dates suggest that the homes had originally been bought on speculation — e.g., with the intent of being resold later, at a higher price.
With the exception of the house in Richmond Hill, which sold in December 2017, each of the houses actually sold for substantially less than their last sold price — a sign that no bidding wars had taken place.
If these houses had originally been bought for speculation, the original buyers did not only lose the difference between what they’d bought the homes for, and what the homes ended up selling for. They also lost what they had spent on standard homeowner fees, like carrying costs, property taxes, homeowners insurance and — if they were really ambitious — renovation costs.
It’s not only speculative buyers who are losing out, though. On MongoHouse, a Toronto-based non-profit that provides sold prices of homes in the Greater Toronto Area, there seems to be a general trend across the city of detached homes being sold for less than their asking price.
Of course, it could be that the flipping frenzy will simply move to condos. There is already a worrying industry built around condo flipping in the city — large volumes of condos tend to exchange hands between a project’s pre-construction phase and a building’s completion.
Flipping could also begin to infest already-built condos, artificially inflating prices and locking out first-time homebuyers from that market as well. The Canada Revenue Agency has been investigating a number of condo flips in Toronto in the past year, and there has been discussion about the need for a tax on flippers to clamp down on the industry.
If it’s clear that condo flipping is on the rise, it could be the catalyst for the Ontario government to take action this year.