This property just got 57 offers – why is Toronto suddenly seeing a spike in bidding wars?

Toronto’s real estate market is in its worst slump in decades, but some properties are generating a surprising amount of competition.

A three-bedroom bungalow at Hancock Cres 6. in the Wexford-Maryvale borough recently attracted a whopping 57 offers. It sold for $390,100 above the asking price of $629,900.

Another three bedroom house on Princeway Dr. 4 in Scarborough attracted 23 offers and sold for $251,000 above the asking price of $799,000.

“It got out of hand,” said Belinda Lelli, a real estate agent at Royal LePage’s Toronto corporate brokerage of the Princeway Drive home. “With that price, we knew we were going to get offers. We just didn’t know we were going to get 23.” said Lelli.

“I had three people working on it and taking phone calls… It was crazy.”

Brokers say they’ve witnessed unprecedented bidding wars in recent weeks — not seen since home sales peaked in February — as potential buyers rush to sign a deal before their pre-mortgage approvals expire. And for another rate hike by the Bank of Canada.

“Buyers are feeling the pressure to take advantage of the interest rates they locked in months ago by buying before their pre-approval expires and before rates rise significantly,” said Lorry Greenspan, a real estate agent with Forest Hill Real Estate. “It leads to increased competition for certain properties as buyers try to take advantage of their interest rate.”

Earlier this month, the central bank raised the benchmark interest rate by three-quarters of a percentage point — the fifth rate hike since March — to bring rising inflation back under control, bringing the overnight rate to 3.25 percent. The central bank said Canadians should expect interest rates to rise even higher as it continues its battle against high inflation.

As home prices fall, rising mortgage rates due to rising interest rates make it harder for buyers to qualify for those mortgages. Pre-approval rates allow potential buyers to get a rate while they are looking for a home and give them about 90 to 120 days of interest protection before they expire.

Because of the competition, Greenspan said he’s seen “two markets happen at the same time.”

“One is that sluggish market that we’ve become accustomed to, where interest rates are putting downward pressure on prices,” Greenspan said. “But at the same time, I see another market, eerily similar to February, where when some properties come on the market, there is intense pressure and competition and they either receive multiple offers or they receive offers very quickly in the listing process.”

Another factor driving competition is a lack of inventory, said Karen Yolevski, COO of Royal LePage Real Estate Services Ltd.

In July, Toronto home sales fell about 47 percent compared to the previous year, while new home sales fell about four percent, according to Statistics Canada. In addition to the lack of inventory, sellers, many of whom have not received desirable offers, are canceling real estate listings, leaving potential buyers with limited options.

Developers are also expected to delay construction of 10,000 new condominium units as pre-build sales plummet amid rate hikes, increasing pressure on potential buyers.

“We don’t see it with every deal, but we definitely see multiple offers depending on the house,” Yolevski said. “If you don’t have a huge amount of inventory in the market, you create a situation where homes that are well positioned, well priced and attractive are picked up.”

Yolevski added that an increase in sales is also normal for a fall market.

“What we are also seeing is a return to a somewhat normalized market. We may have forgotten what a normal real estate market looks like in GTA, where it’s a bit quiet in the summer and then picks up again in September,” Yolevski said.

The initial shock of rising interest rates has also normalized, Greenspan said.

“As rates continue to rise, any rate you can get now seems to be better than the rate you will get in a few weeks or months,” Greenspan said.

“The shock has worn off. Reality has begun. And if a buyer wants to buy something, now is a better time than in a few months, when prices will rise even further.”

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