Real estate agent says that a Scarborough bungalow listed for $2.2 million does not indicate a bubble

The broker listing the pricey development opportunity says investors can split the property to build and sell two homes for nearly $3 million each


Scarborough bungalow listed at $2.2 million is sitting on a large lot that can be split in two
Jermaine Smith

A Scarborough bungalow is currently listed at $2.2 million, which is double the record-breaking average price for a home in the Greater Toronto real estate market. The selling agents says that price is not evidence that Canadians are sitting on a housing bubble, as one economist has recently said.

The bungalow at 129 Manse Road, in the West Hill area not far from the Rouge and the Guild, is being sold as a development prospect. The listing says the massive 119 x 112.42 foot lot has approval to be split in half so that a buyer can build two large homes on the property. RE/MAX realtor Dan Hoffman, who is representing the seller, estimates that building 5,000 square-foot homes on each lot would cost an extra $1 million each. So that’s an approximately $4.2 million investment.

“You’re looking at $2.6 or 2.7 million,” says Hoffman, predicting what each home would fetch.

There’s at least one person in Toronto who wouldn’t go for that proposition.

Economist David Rosenberg told BNN Bloomberg that Canada might be experiencing “one of the biggest bubbles of all time” and that he would “absolutely not” invest in a home in the Greater Toronto real estate market.

Rosenberg was speaking in reaction to the Bank of Canada’s announcement that they will be holding the overnight interest rate at the record-low 0.25 per cent.

He pointed out that Canada’s unemployment rate is at 9.5 per cent, which is higher than peaks during the last two recessions, “including the great financial crisis.”

In a 2021 Housing Market report, the Canada Mortgage and Housing Corporation explained the cognitive dissonance between a pandemic causing high unemployment rates and a boom in the real estate market. The report explained that the service sector, which largely employs renters, was hit hard by the pandemic.

Meanwhile, high-income households experienced little job loss but benefitted from the low-interest rates, which in turn is driving house prices higher. The average selling price in February for a home in the Toronto real estate market was $1,045,488, which is a 14.9 per cent increase over February 2020.

“Home prices are up year-over-year with practically no wage growth,” says Rosenberg, who adds that the financials behind Canada’s real estate surge looks a lot like the dot-com bubble in 2001.

Hoffman isn’t alone when he argues that there is no bubble. Buyers investing in Toronto real estate and developing properties are counting on both a reopening of the economy post-vaccine and surging demand as soon as immigration opens up.

I tell Hoffman the idea of a West Hill fetching close to $3 million sounds astronomical.

“A lot has to do with who’s buying them,” he responds, suggesting we get away from thinking the traditional four-person family with $125,000 is the only kind of customer in the Toronto real estate market.

“I’m on the frontlines and I see two families moving into a house like this,” says Hoffman. “I see people buying a house and renting out the basement for $2,000. I see a lot of gifted money. I’ve seen parents put $500,000 into their kid’s pocket for the down payment. There’s a lot of money out there. There’s a lot of equity.”

@justsayrad

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8 responses to “Real estate agent says that a Scarborough bungalow listed for $2.2 million does not indicate a bubble”

  1. Of course there is a real estate bubble. People who pay $1,000,000 plus on average for a house in Toronto are crazy. People forget, or never knew, that in December 1987 the Toronto market peaked & in the next four years prices dropped by 35%. Same thing will happen soon.

  2. Definitely a bubble right now ! There are problems with the appraisal of the house being less than the selling price! There aren’t enough houses on the market. I told my buyers to wait . Sure it’s a seller’s market. But when you see 30 to 40 offers on a listing that’s not normal. 3 to 5 is normal !

  3. Never ever believe what a real estate agent says. They’re profiting from the outrageous prices and that is all they care about. They have the integrity below that of a politician.

    • It sounds like maybe you had a bad experience. Since you clearly don’t have any concept of what our jobs entail and naively believe we are all in it for the money, I’ll spell it out. Just to give you some perspective, some insight into the money aspect of your comment. If a buyer pays $100,000 over asking price, the average realtor would take home less than $1000 extra after brokerage split, fees and taxes. One house listed by one agent. That agent will get paid when the home sells. 30 buyer agents. One will get paid. 29 realtors won’t get a paycheque. Sometimes doing 10 offers for one buyer before they get a home. If they even get a home. Some just quit their search first. And guess what. We don’t get paid unless our client buys a house. There is nothing more heartbreaking than to tell a buyer that they weren’t successful (with their outrageous offer) AGAIN. There aren’t a lot of professions where you go to work every day, sometimes work til midnight, on call 24/7 and maybe never get a paycheque. Please don’t disparage a group of people based on your perception and zero actual knowledge.

      • Real Estate agents are pointless and will be replaced by the Internet within a couple decades. They serve the same function as a website.

  4. I dont know how people will come up with the money. I had to move way up north because I couldn’t afford Toronto.
    It’s just insane how crazy that market is. I dont know they think future generations will be able to afford anything In all of Canada

  5. I met Tim Hudak, head of OREA – the lobby and regulating group for real estate agents in Ontario, and I asked him about the housing market and he hilariously tried to claim that there wasn’t an affordability issue with real estate. He tried to tell everyone that agents didn’t need to be regulated because the issue wasn’t overpriced homes but a need for more homes to be built.

    What we really need is for real estate agents to have stricter regulations put on them. They’ve been unscrupulous – from double ending deals (where they represent both the buyer and seller, often without revealing that fact) to shadow buying (raising the price by artificially selling to multiple buyers to jack up the cost and increase their commission).

    Real estate groups have managed to evade regulations beyond passing a simple test. All thr politicians are afraid to do anything about the real estate market because it’s been used to prop up a failing economy for the last 15 years.

  6. With the drop in interest rates, and if someone is paying over a 25 year mortgage as opposed to cash, the buyer is essentially paying the same amount. The difference is the interest payments before the interest rate drop were going to the lenders and now the savings in interest rates are going to the asset holder or homeowner.
    If rates go negative, like Europe, expect another upward surge in prices.
    Since America destabilized Hong Kong many HongKongers are fleeing to Canada and selling their multuimillion$$$ 700 sq ft condos, so a 2 million$$$ bungalow in Toronto is cheap! As the West continues to destabilize nonwest countries immigrants will continue to flood into Canada.

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