The Globe and Mail - 06.03.2020

H2 | REALESTATE O THEGLOBEANDMAIL | FRIDAY,MARCH6,2020

R

eal estate agents in Toronto
and the surrounding sub-
urbs say rapidly escalating
house prices are pushing some
buyers onto the sidelines and
forcing others to change strate-
gies. They’re also watching to see
if the spread of the coronavirus
will change the market dynamics.
For now, bullies – who submit a
pre-emptive offer before the
scheduled deadline – are ram-
pant.
Patrick Rocca, a real estate
agent with Bosley Real Estate in
Toronto, says listings are starting
to trickle back into the market,
but they quickly disappear.
“I wish I had 50 condos – that
stuff is flying off the shelves,” says
Mr. Rocca, who specializes in the
midtown markets of Leaside and
Davisville.
Mr. Rocca says the first-time
buyer market is scorching, the
price segment above $1-million is
hot, and the segment above $2-
million has not fully reignited.
“It’s spotty,” he says of the
higher end.
He points to one midtown
house with an asking price of
$1.89-million which sold for $2.2-
million, while others in that price
range languish.
Investors who built high-end
homes are continuing to struggle,
he says, because many of them
are holding out with very high
asking prices in order to recoup
their investments.
As for buyers looking in the $1-
million range, competition is
fierce, Mr. Rocca says.
He has one set of clients with a
maximum budget of $1.05-mil-
lion who have been looking for a
house in midtown. Properties
comparable to the ones they were
looking at in the fall now fetch
$1.2-million, he says.
“I think they may be priced out
of the market now,” says Mr. Roc-
ca, who has advised them to
move their search to East York
and other more affordable neigh-
bourhoods.

“I get it,” he says of buyers who

feel discouraged. “They’re proba-

bly disappointed, frustrated.”

Thien Nguyen, a real estate

agent with TrilliumWest Real Es-

tate Brokerage in Kitchener, Ont.,

recently drew 27 offers for a 1,625-

square-foot townhouse in the

bedroom community of Maple,

Ont. The end-unit freehold town-

house sold for $945,000, or

$225,100 above the asking price of

$719,900.

Mr. Nguyen says the list price

was set to draw attention, but he

estimated the townhouse would

sell for between $825,000 and

$830,000, based on recent com-

parable sales.

“This number truly surprised

me,” says Mr. Nguyen, who had

more than 300 people tour the

property during two open

houses.

Mr. Nguyen set a date for offers

and the sellers refused to consid-

er pre-emptive bids before that

deadline because they had been

beaten many times by bullies

when they were acting as buyers.

“We decided to give everyone a

fair shot on offer day and let the

market decide the best value for

this home.”

Many of the house hunters

were first-time buyers who were

already pushing their budget to

the limit, he says.

Mr. Nguyen says he is truly

happy for the sellers, but he also

finds the run-up in prices alarm-

ing. A house across the street sold

three months ago for $785,000.

“The scary thing is, the prece-

dent is now set in the small town

of Maple.”

Mr. Nguyen says that leaves his

buyer clients with budgets in the

$700,000 to $800,000 range out

of the market.

He is planning to take his cli-

ents to look at townhouses in

more distant Newmarket and In-

nisfil, where, he says, deals can

still be found on townhouses

around the $700,000 mark.

“I’m having to move my clients

further and further outside of the

city.”

Mr. Rocca is gearing up for a

busy couple of weeks before stu-

dents and their families head into

the March break for public and

private schools.

He expects a lull in the market

for single-family dwellings during

the school holidays, then another

burst of action.

Mr. Rocca says one factor that

could slow down the pace is the

spread of the novel coronavirus,

which causes the illness CO-

VID-19. People have begun raising

the question of whether the virus

will affect sales, but it’s too soon

to say, he says.

He points out that an econom-

ic slowdown caused by the virus

would be a risk to real estate.

“I don’t know if it will have an

impact on this market,” Mr. Rocca

says. “If we’re talking about a re-

cession, there’s a real threat of

that.”

He adds that financial market

volatility caused by nervous in-

vestors reacting to news of the vi-

rus could in turn unnerve real es-

tate purchasers.

“What’s the trickle-down effect

and what’s the timeline? I think

in the second quarter it could

have an effect.”

Real estate agents Paul Maran-

ger and Christian Vermast of

Sotheby’s International Realty

Canada say uncertainty may lead

buyers to temporarily shelve

their plans to move up to a more

expensive property, for example.

Mr. Maranger and Mr. Vermast

say foreign buyers may also have

to delay plans to purchase in Can-

ada.

The two had a potential buyer

for one of their own listings who

was waiting for approval from

parents in Singapore. The pur-

chase was put on hold when the

family members couldn’t get out

of Singapore, they say.

With stock markets correcting,

peoples’ perception of their per-

sonal wealth diminishes, they

add.

On the flip side, the risk of the

illness may only reinforce a sense

of comfort and security at home

for some residents.

Also, when stock markets cor-

rect, some investors favour assets

that they perceive as safe havens,

such as gold, government bonds

and real estate.

Bullybiddersrunrampantaspricesescalate

‘IwishIhad50condos

–thatstuffisflying

offtheshelves,’

onerealtorsays

CAROLYN
IRELAND

NEXTMOVE

TORONTO

RealestateagentThienNguyensayshe’shappyforthesellersofthistownhouseinMaple,Ont.–whogot$945,000fortheproperty,$225,100

aboveaskingprice–butalsosayshefindstherun-upinpricesintheregionalarming.IGUIDE

T

he City of Toronto is in the
process of designing a regu-
latory and enforcement re-
gime for short-term-rental (STR)
operators. But if the experience of
other cities is any guide, the new
rules could kick off a high-stakes
game of cat-and-mouse with
hosts bending the rules to contin-
ue their lucrative businesses.
This spring, Toronto will begin
registering short-term-rental op-
erators. It will then begin enforc-
ing the rules first passed in 2017.
Those rules were upheld in 2019
by the Local Planning Appeal Tri-
bunal after commercial STR hosts
filed an appeal.
“The city will first focus on edu-
cating the public about the new
regulations. City staff will also
work with both short-term-rental
operators and companies to en-
sure compliance,” said Carleton
Grant, executive director of the
municipal licensing and stan-
dards division. “The city has the
authority to cancel registration
rights of short-term rental oper-
ators, if a short-term operator
does not carry out activities with
integrity and honesty, violates
any federal, provincial or munici-
pal law or bylaw, or conducts ac-
tivities in such a way that infring-
es on the rights or endangers the
health and safety of the public.”
As recently highlighted in The
Globe and Mail, many short-term
rental operators may already be
violating the city’s existing by-
laws around rooming houses and
the provincial fire code.
The Globe highlighted the case
of a listing calling itself “The Man-
sion” in North York, a single house
for which there were 35 individual
listings. The operator was known
to have played host to more than
20 people at a time in triple-bunk
beds packed into almost every
room in the mid-century house at
1 Toba Dr.

After the story appeared, local

councillor Jaye Robinson’s office

notified the licensing and stan-

dards department and an investi-

gation was opened. On Feb. 21, by-

law investigators issued a notice

to comply with zoning and an or-

der to comply with property stan-

dards.

A spokesperson from Airbnb

said that when a listing is brought

to their attention that could affect

the safety of the community they

may take action against a listing –

including suspension or removal.

To date, 1 Toba’s host, listed only

as “Walter,” still has an active ac-

count. The “Mansion” listing has

been taken down, but his account

still shows a second rented house

being sublet on Airbnb at 411 Carl-

ton St., although his profile is fil-

led with automated reviews noti-

fying users he has cancelled many

coming stays.

Harmari STR, a compliance ser-

vices company active in many U.S.

states, did a data analysis of To-

ronto to estimate how wide-

spread the rooming house issue

was. The company’s Toronto-

based chief executive officer, Al-

len Atamer, searched the data-

base the company has built for

commercial clients – including 15

condo buildings in Toronto and

47 municipalities in North Amer-

ica – for “listings that include the

keyword ‘bunk’ in their reviews,

plus any [STR] listings that adver-

tise over 12 guests.” More than 400

examples with multiple bed-

rooms and claims of being able to

accommodate between 13-18

guests at a single property

showed up on such platforms as

VRBO, Airbnb and Booking.com.

“It’s still the Wild West in this

industry,” Mr. Atamer said.

Harmari STR got its start nine

years ago in an earlier era of dig-

ital disruption, when it would

analyze sites such as Kijiji and

Craigslist for police and motor ve-

hicle regulators seeking informa-

tion about those using the classi-

fieds platforms as a vector for sto-

len cars and other forms of insur-

ance fraud. “We are applying that

expertise and skill to STRs, to find

and identify them. Without

knowing where they are [cities]

can’t police them. That’s where

the gap is with the platforms and

municipalities,” he said.

Harmari examines 60 sites that

do short-term bookings, although

Airbnb is still the market leader

estimated to control close to 80

per cent of Toronto’s listings.

Some listings Harmari found

sublet as many as seven bed-

rooms per house, well above the

city’s limit of three per STR site,

and some even advertise their

likely status as an unlicensed

rooming house in the listing

name: “Toronto 6 Bedroom entire

House,” “Lavish townhouse w/

sauna & jacuzzi - Sleep 18,” and “81

Fancy Entire House for Up to 20

people”.

“[Airbnb’s] whole business

model hinges on them download-

ing responsibility to thousands of

individual hosts and not being

held accountable for what they

post on their platform,” said Thor-

ben Wieditz, an activist and spo-

kesperson for the Fairbnb coali-

tion that has pushed Canadian ci-

ties toward harsher regulations

on the industry.

Toronto’s bylaw says hosts can

rent up to three bedrooms in a

unit for an unlimited number of

nights a year (up to a maximum of

28 days per stay) or their entire

home for a maximum of 180

nights a year. The major road-

block for commercial operators in

Toronto’s bylaw is a restriction

that only a host’s principal resi-

dence can be used for short-term

rentals.

According to Mr. Atamer, there

are already more than 30 large-

scale property management com-

panies operating STRs in Toronto

• some with 100 or 200 rooms un-
  der management – that could
  evade this rule today using a web
  of identities. “One of the classic
  examples I can give, you see an
  Airbnb hosted by a very attractive
  female blonde, in the reviews it’s
  all comments about her ‘friend
  Yuri’ handling the listing. You’ll
  see him 20 times in the reviews,
  andthen in other reviews on oth-
  er listings. It’s all a façade,” Mr.
  Atamer said.
  So far, Harmari’s Toronto cli-
  ents have been condo boards that
  ban short-term rentals, and the
  service is also attractive to build-
  ings with an integrated hotel com-
  ponent – such as the former
  Trump Tower, now the St. Regis
  Hotel, at 325 Bay St. – that proper-
  ty managers are loathe to under-
  mine.
  Mr. Atamer said Toronto hosts
  attempting to evade scrutiny are
  also beginning to borrow a tactic
  his company has identified else-
  where: vampire listings.
  “Vampire listings pop up at
  night and go down during the day,
  they are trying to hide from condo
  security guards, from bureaucrats
  and others,” he said. In a snippet
  of research Harmari published
  last year, about 12.6 per cent of the
  4,914 STR listings in Fort Lauder-
  dale, Fla., were intermittent “vam-
  pire listings” that hosts remove
  and repost every day. Sonoma
  County, Calif., a popular wine re-
  gion, saw 14 per cent of its 5,156
  listings behave the same way.
  According to a spokesperson
  for licensing and standards, To-
  ronto is considering hiring out-
  side contractors to build up its
  monitoring systems. A contract to
  build the registration system was
  awarded to accountancy giant
  KPMG, but a request-for-propos-
  als for the investigative tools has
  not been awarded yet.

Torontoseekstotame‘WildWest’ofshort-termrentals

SHANEDINGMAN
REALESTATEREPORTER
TORONTO

THELISTING

Onetechniqueusedby

short-term-rentalhosts

whoarelookingtoevade

scrutinyfrommunicipal

officialsandcondo

securityguardsisto

createwhatarecalled

vampirelistings:postings

forunitsthatgoonline

atnightandthencome

downduringtheday.

FREDLUM/

THEGLOBEANDMAIL

[Airbnb’s]whole

businessmodel

hingesonthem

downloading

responsibilityto

thousandsof

individualhostsand

notbeingheld

accountableforwhat

theypostontheir

platform.

THORBENWIEDITZ

ACTIVISTAND

SPOKESPERSONFORTHE

FAIRBNBCOALITION