We are now seven months into the Coronavirus crisis, and while there is no denying that the outbreak has unfortunately wreaked havoc on our lifestyles, the economy and a number of sectors across the Toronto real estate market, I remain generally optimistic about our resilient Toronto housing market. Whether it is the escalating prices or renewed bidding wars, it appears to me that there has been an extraordinary and swift recovery for a reenergized Toronto residential real estate market.
Average single-family house prices in Toronto this year broke ceilings in July, August and September. The Toronto Real Estate Board recently reported that September 2020 sales were up 42.3 per cent, with the average price of a Toronto home being priced at $960,772-up 14 percent from the same time last year. According to a release recently put out by TRREB’s president, Lisa Patel, she notes that “increased demand for ownership housing has been based on improving economic conditions, in terms of monthly GDP growth and job creation, and the continuation of very low borrowing costs.” In addition, Patel stated that “fewer households have chosen to go on vacation as a result of COVID-19 and instead have remained in the GTA and been active in the housing market, satisfying pent-up demand from the spring.” Going into the fall and early 2021, I for one strongly believe that this “pent-up demand” will remain intact as the fundamental demand for single family homes in Toronto continues to exceed the fundamental supply.
I would be remiss at this point if I didn’t mention a recent study that was released by a Swiss investment bank warning that Toronto is “sitting on a high-risk bubble” and ranks as the third most-over priced major city in the world. This prediction, like others, repeatedly warn that the COVID-19 impact on employment and immigration will make home prices more humble. While I believe in the value of thinking through the worst case scenario, it is important to note that GDP is rebounding, unemployment is coming down, consumer spending is rising and business confidence has been steadily rising since April. The federal government and the major Canadian financial institutions have also repeatedly indicated that they are willing to do whatever it takes to prop up our country’s housing market.
While the market for single-family homes in the Greater Toronto Area no doubt remains in a frenzy, the downtown condo market appears to be one segment where inventory is soaring and prices are beginning to soften. John Pasalis, president of Realosophy Realty Inc., notes “I think we’re starting to see some sellers sell for a little bit less than they would have even three months ago.” Pasalis states that there was a 215 percent increase in condo listings within the downtown core at the end of September, as owners flee the downtown core for larger, cheaper living spaces.
The Financial Post recently reported similarly that demand is lagging for "micro-condos" in particular. Sales of units sized 500 square feet or less were down 20 percent, year over year, in September of 2020. "Pre-COVID-19, these condos were the hottest on the market. Investors flocked to them because they were the only form of housing under $500,000 available in Toronto and the high rents they could charge on these units meant that making profit was close to a sure thing," reads the Financial Post piece on micro-condos. "Now they’re the ones flooding the market with listings."
Looking forward, Royal LePage is forecasting that the aggregate price of a home in the Greater Toronto Area will increase another 8.5 percent in the fourth quarter of 2020 compared to the same time last year, though no predictions for condo prices specifically were provided by the real estate company.
However, I believe that the trajectory of COVID-19 will ultimately determine whether the higher inventory can eventually affect pricing. A vaccine could certainly bring back immigration and the demand there could be enough to convince condo owners to take their units off the market. Once we move into a post-COVID-19 period, fueled by population growth from immigration and non-permanent residents, I believe the GTA could once again be in a market with shockingly little supply to match a rising demand.
It would also appear that anyone looking to buy a pre-construction condominium right now has some leverage. "With the exception of a few new construction projects over the last few months, the market has slowed, and developers now appear to be prepared to offer some additional incentives or launch with less aggressive pricing, there are more units on the market, or inventory," says Nima Khadem, broker with Royal LePage Signature.
“Pre-COVID-19, up to March, Toronto had about one month of inventory of condos on the market; in other words, it would take about one month to sell all the units on the market. Now, we have about three months of inventory, or three times the pre-COVID-19 amount, which gives buyers the kind of edge they have not had for the last five years in Toronto’s hot market.”
I believe that despite COVID-19 related lockdowns and the short-term uncertainty that we as a City will inevitably face moving forward, the Toronto housing market will continue to remain active and flourish for the duration of 2020 and into the foreseeable future. As one of the most popular real estate markets globally, people around the world continually choose to live in the Greater Toronto Area for many reasons, including Toronto’s easily accessible public transit, significant amounts of educational and employment opportunities, professional sports teams, an excellent arts and culture scene and diverse atmosphere.
About the Author
Shael Weinreb holds a LL.B. from Queens University. He most recently held the position of President Chief Operating Officer of Freed Developments, where he was responsible for the operations of the organization and executing on the long-term growth strategy.