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A History of Bidding Wars
One of the most striking changes to Brampton’s housing market over the last five years is that bidding wars have become the new reality.
Today, the majority of homes sold in Brampton receive multiple offers and sell for higher than the asking price. This is one of the big reasons that prices are rising so rapidly in Brampton, at a rate of more than 1% every month—that’s 15% annually!
What’s driving this trend? Let’s take a look at the history of bidding wars in Brampton and Toronto.
After the crash of 1989/90, the market favoured buyers, with plenty of homes available for low prices. As a result, bidding wars were rare in both Toronto and Brampton, affecting less than 2% of sales.
After 1995, prices began to recover slowly. In Toronto, the percentage of homes sold over asking price rose from under 2% in 1995, to around 8% by 1999. But in Brampton, the rate remained under 3%:
First and Second Plateaus: 2002–2013
Toronto’s rate of bidding wars jumped twice in this period, first from 8% to 13% in 2002, then a steady period of 6 years, then from 13% to 20% around 2009, then another steady period of 5 years.
Meanwhile, Brampton’s rate continued hovering around 3% until 2009, when it jumped to around 8%. Brampton remained well behind Toronto in the bidding war trend:
In the past three years, things have changed completely. Toronto’s rate began to increase steadily each year, almost doubling by 2016.
But the real surprise was Brampton. It’s as if we decided we wanted to outdo Toronto. In two short years, our percentage of homes selling over asking price has gone from 8% to an unbelievable 62%:
We’ve reached a point where almost two-thirds of homes put on the market in Brampton will be sold through a bidding war.
Remember, before the 1990’s less than 1% of homes sold in Brampton experienced bidding wars, and even in 2013 the rate was only 8%. What we’re seeing now is a complete change in the way real estate works in Brampton.
All of this is related to high demand and low supply. Bidding wars are a symptom of high demand, because they happen when many buyers are interested in only a few homes. But they also are a factor in driving up prices, because the pressure of a bidding war will often cause buyers to pay more than they would have under “normal” circumstances.
When prices go up, demand normally goes down, and the market corrects itself. But that hasn’t been the case in Brampton. Let’s take a closer look at the rate of multiple offers over just the last few months:
Clearly, this is a trend that is not yet slowing down. One way or another, the Brampton market is going to look completely different by the end of 2016.
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