The Lowdown On Toronto’s 2020 Pandemic Real Estate Market
2020 has been one topsy-turvey year that none of us could have ever imagined! If that isn’t the understatement of the year, then who knows what could be?! The condo market was white-hot to start the year off, the housing market was also scorching, just not as robust as the condo market, thanks to the condo investor. Then cue mid-March – the first wave of the COVID-19 pandemic had our real estate market all but shut down. Because of the Toronto Pandemic Real Estate market change, transactions trickled to a near standstill. As our scientists and doctors learned more about the pandemic it became clearer that there are certain precautions that we as citizens could take to limit the risk and allow us to begin socializing and returning to the public space. We wrote about the early Toronto real estate pandemic days much of what we said continues to ring true.
Post-Lockdown Race To Buy Houses:
Once the First Wave lockdown was over, we saw an explosion of interest on houses of all types in Toronto, mainly the larger footprints. Not only this housing stalk, but we also saw Torontonians were looking to shift their lifestyles by purchasing country houses, cottages, chalets and even suburban homes – here are essential tips when looking to buy in the country. The desire for more space and safety combined with the incredibly low lending rates – i.e., cheap mortgage money – has created a significant shift in people’s desired living situations. Less interest in condo living and far more interest in open space, and plenty enough workspace so that one can work from home during this uncertain time of the pandemic. Some have mused that the necessity to buy homes post-lockdown is similar to the race of getting a haircut in the first tow months of the summer – would the excitement dissipate once the desperate folks have gotten what they want?
Fall Market Shifting over Toronto Pandemic Real Estate market:
Toronto’s fall real estate market had a few challenges to kick of September:
- The return to school was stressful; filled with the unknown, even the teachers had little idea of what the return to school would look like in actuality. Parents were stressed as they transitioned from watching over their children all day while working from home to sending their children off to school with myriad questions. The stress was high, beyond high for many;
- The September long weekend arrived later than usual – the issue with this in real estate terms is that this postponed houses coming to market to avoid being overlooked;
- Rosh Hashana also impacted the launch dates of listings.
Combine the above factors, and you have a strange beginning to the fall marketplace.
The houses are moving and moving very well. When we saw 12-15 offers on some homes in the summer, we now see 3-6 offers, if priced similarly. No doubt that buyers still want homes. However, there is less demand as there was in the summer. Are their deals to be had? Hmm, not really – however, we will get to our thoughts on what is to come at lease in the entry house marketplace.
Downtown Toronto condos have slowed. That’s putting it lightly. The condominium market is quickly becoming a buyers market without a floor to be seen. In other words, we are likely on the precipice of a massive condo value correction. Getting showings on high-rise condo buildings downtown is no easy feat, let along getting offers on condos. This will mean we see a significant change in condo values in the short-term.
Downtown Toronto Condo Correction:
The downtown condo correction is upon us. We see more and more condos coming to the market daily downtown without enough eager buyers snapping these up as we saw in early 2020. The absorption rate was basically set at 2-2.5 months during the last few years – this means that there were enough condos on the market to last 2.5 months of current market activity. Now, we see 6-7 months of supply – i.e., 6-7 months for the supply to be absorbed into the buyer pool. Note: there are more and more condos coming to the market.
Downtown Condo Correction:
Despite mortgage rates being at all-time lows now and into the foreseeable future, there is a shift happening. The pandemic is precipitating a condo market correction. Their number one reason we see a correction is that the condo market has been fuelled by investors who have provided renters with a palace to live in Toronto. There are sub reasons that we will dive into.
- The condo market has been driven by investors who have provided renters with a place to live because purpose-built rental apartments have not been built in Toronto for decades. Since the pandemic kicked in, some renters have struggled to pay rents, and some are not paying rents, some have vacated their condos. Now that CERB has ceased, the rental issue has come to a head.
- Students did not return this Fall. Typically our inbox is full of student renters looking to secure a place in the Fall. This summer? Nothing. Not a single student inquiry, and very few general rental inquiries. Without students returning to campus with confidence, there isn’t an immediate end to this issue for landlords.
- Immigration doors are closed in Canada. This is a significant factor for the vacancy as well. We’ve seen numbers around 200K people a year moving to the GTA. Now? Zero. When will this change? Hard to say, other than to acknowledge the necessity of a vaccine in the year or two to come.
- Corporations started “work from home.” Many companies in downtown Toronto have told their employees to work from home for the year and possibly much longer. With this in mind, people have left the downtown core, citing no need to be within a short commute of work. Many have returned to home towns, the suburbs, and rented land north of the city.
Current landlord investors have decided to divest their condos. Unfortunately, many have decided to do this at one time, leading to a flood of new listings. Those landlords who would like to retain their condos are looking to find new tenants, which has led to a massive influx of condo on MLS, viewit.ca, and other private websites. With this much condo supply, the renters have many choices, which is further driving down the rental values. We are currently down approximately 20% in the rental amount.
The influx of listings means that it’s harder and harder to differentiate one condo from the next. We expect to see condo prices to drop in the months to come as we see more and more condos come to market. 2021 may also be a challenging year for condo sales.
Without students, immigration, and companies returning to some form of pre-pandemic normalcy, we are likely in a state of condo market flux for some time to come.
What we are most curious about it when does the condo slow-down impact the first time house buyer? As some of you may know, the condo market has driven Toronto real estate values upwards for years and years. Condos fuel the housing market. The slowdown will indeed have an impact on the first time house buyer who can no longer access the necessary capital to buy a house…stay tuned.
There is no question that this is a fantastic time for condo buyers to purchase, if you are looking for your primary residence – the opportunities abound!