BMO economist Robert Kavcic says sluggish economic and job market conditions are contributing to a slump in the condo market.Sammy Kogan/The Globe and Mail
Improving sales, elevated inventory and flat prices are combining to create a stable real estate market across Canada, but some common factors appear to be dampening the enthusiasm of buyers in many regions.
Robert Kavcic, senior economist at Bank of Montreal, points to sluggish economic and job market conditions, the Bank of Canada on hold, and mortgage rates hovering above levels that might spark strong demand.
Market psychology is also a hurdle, the economist says in a note to clients.
“Just as expectations of higher prices drove accelerating gains on the way up, the understanding that prices are falling is holding back buyers on the way down in some locations.”
He points to Southern Ontario as the weak spot, with a glut of condos hitting the resale market and pushing prices down in Toronto and beyond. Prices for single-family homes are holding up better but are still falling, the economist says.
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In mid-sized Ontario cities, real estate agents say putting deals together in the current market requires ingenuity.
In Guelph, Ont., Aimee Puthon of Coldwell Banker Neumann Real Estate recently worked with one young couple who decided to take advantage of a slower market to trade up.
The couple submitted an offer for a detached house with an asking price of $1.25-million in the city’s historic Exhibition Park neighbourhood, but they lost out to a competing bidder.
A few days later, the listing agent called to say the first buyer had backed out.
Ms. Puthon’s clients raised their offer slightly to $1.2-million and the sellers accepted.
The homeowners also agreed to their conditions, including a common one in today’s market: the “sale of purchaser’s property.”
The clause means the deal would only firm up once the couple sold their starter home.
The homeowners agreed, but the pact included an “escape clause” which would allow them to continue to show the property. If another offer landed, Ms. Puthon’s clients would have 48 hours to waive their condition, or the sellers would be free to accept the new offer.
Ms. Puthon was confident the couple’s three-bedroom bungalow with a finished basement would sell quickly because of its appeal to first-time buyers. Soon the couple received two offers.
They accepted one buyer’s conditional offer, but that deal grew shaky as the buyer kept asking for more time.
“You can’t continue to keep stringing us along,” Ms. Puthon advised their agent. That offer fell through, but another buyer stepped up and the home sold for $750,000.
Ms. Puthon says finalizing the deal for the Exhibition Park house after all of the tumult was a relief to all.
“We really didn’t want to be bumped,” she says of the escape clause, adding that pieces in the process are stacked like dominoes.
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This month, Ms. Puthon says, the Guelph market has hit the traditional August slowdown.
For inventory that has been sitting, cutting the asking price can bring new attention.
“Price adjustments are common in our market right now,” she says. “We want to try to get those people through the front door.”
Broker Faisal Susiwala of Re/Max Twin City Faisal Susiwala Realty says setting a date for reviewing offers is less common than in the past in the Ontario cities of Kitchener-Waterloo and Cambridge, where he does much of his business. But with some fine-tuning for the current market, the strategy can lead to competing bids, he says.
The practice is more successful for homes in the average price range or below, where the buyer pool is larger.
Mr. Susiwala sets an asking price about 5 to 7 per cent below the price he’s hoping to achieve. That’s a change from the high-octane markets of years past, when he would set the asking price 10 to 20 per cent below the amount he estimated buyers would be willing to pay.
He also monitors weather forecasts for upcoming heatwaves and rain storms, and he has moved his typical offer night to Tuesday from Monday in order to give buyers an extra day to go to the bank.
“We’ve had to pivot,” he says. “We’re so in tune with what external factors are going to affect our offer date.”
If the sellers do not receive an acceptable offer on the designated date, Mr. Susiwala will extend the deadline by one week.
If, after the second week, the property has not sold, Mr. Susiwala advises the clients to accept that the market has spoken. Some homeowners then decide to wait and try again later, or they list the property for lease instead.
In higher price brackets, Mr. Susiwala aims to keep the asking price below competing properties in the area. He doesn’t build in much room for gradual price reductions or haggling.
In his experience, homes quickly gain traction when they land on the market at a price below the prices of comparable properties languishing on the market.
“We’re going to price it tight and we’re going to hold firm,” Mr. Susiwala recommends to sellers.
In some cases, the sellers decide to go with another agent who agrees to list at a higher asking price.
Mr. Susiwala says some agents agree to try a higher asking price because they’re afraid the seller will choose to hire someone else, but Mr. Susiwala says that approach often backfires.
“You’re going to lose the listing anyway because you didn’t do your job and deliver,” he says.
In one case, the sellers of a farm listed with another agent in March, 2024, with an asking price of $5.5-million. The property had a series of price trims until it reached $4.895-million in February of this year, and the listing eventually expired without a sale.
In July, Mr. Susiwala took over and recommended an asking price of $3.995-million. The property is unique, he says, because it provides space for three generations, but listing below $4-million and bumping up the social media was key.
“Once you get to a certain cap, you can’t get anything to move,” he says, adding that only a handful of properties in the area have ever sold above that mark.
An offer soon landed for $3.7-million. The sellers made a counter-offer of $3.915-million, the buyer agreed, and the property was sold in five weeks, Mr. Susiwala says.
Today, he finds most aspiring sellers are receptive when he gives them unvarnished guidance.
“Sellers are looking for people who tell them the truth – not what they want to hear.”
As for buyers, Mr. Susiwala says many buyers have been holding off because they are waiting for interest rates to drop. Others are concerned about employment, tariffs, and politics south of the border.
“The mood is uncertainty and it’s surrounding us.”
In some cases, a return to the office is driving transactions.
In the technology hub of Kitchener-Waterloo, for example, employees are increasingly required to show up to work in person.
“The key people at companies are no longer able to work at the cottage – they want them in the office,” he says. “We’re seeing a little bit of movement because of that.”
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In other cases, people are leaving the area to move closer to jobs. It can be a tough calculation for people who bought at the height of the market during the early years of the COVID-19 pandemic, he says.
“They are the ones who are really feeling the pinch,” he says.
Mr. Susiwala is working with one employee who plans to sell a four-bedroom detached house in Cambridge because she now needs to drive to her job in Mississauga five days a week.
The homeowner will likely fetch around $900,000 for her property, he says, but she will be paying about $1-million for a three-bedroom townhouse in Milton.
“She is downsizing in property but upsizing financially,” he says.
In the segment for new homes, Mr. Susiwala is seeing multiple builders cutting their prices on houses in various stages of construction.
People are reluctant to buy from plans, so builders are sometimes going ahead with projects so that buyers can walk through finished homes.
“They’re slashing just to exit the market, just to break even, just to keep their employees,” he says. “They can’t afford to keep these lots just sitting.”