EDITED on July 03, 2020
The Toronto Real Estate Market has often been confusing to understand at the best of times, let alone during a global pandemic. If you want to understand why things are happening the way they are and what is forecasted for the rest of the 2020 year, then you need to understand the before and after (of COVID-19).
At the start of 2020, Toronto was a booming market and was expected to grow significantly over the next several years. There were several reasons behind this:
- Immigration: we anticipated 80000-100000 new immigrants per year to Toronto
- Growing and Stable Economy
- Rental Vacancy of less than 1%
In short, demand exceeded supply, thus leading to rapid price appreciation. In 2019, condo prices increased by over 10% and similar appreciation was expected for the future. Infact, the first quarter of 2020 did see appreciation as expected.
Here are a couple of articles about the Toronto market last year (2019) and what was forecast for this year (2020), prior to COVID-19:
After COVID-19 arrived in Canada, April 2020 was a standstill month for Toronto Real Estate. Sales were non-existent because
- it was deemed unsafe to conduct showings
- buyers were uncertain about the economy and their income streams, causing them to pause all future purchases
One thing to note is that, in general, home prices did not drop. This is because buyers and sellers all backed out of the market in tandem. Real estate prices are determined by demand vs. supply. As the supply dropped, the demand dropped as well, which kept home prices stable. In summary, what COVID-19 did was put a pause on the appreciation that was expected out of the Toronto Real Estate in 2020. The market did not cool off; it simply went from super-hot to warm.
As we got into May 2020, the market started to adjust to life after COVID-19 and some government restrictions were lifted. We saw sellers and buyers coming back into the market. Toronto started to go back towards super-hot. Here are a couple of important statistics from the articles mentioned below:
- Home prices rose 3% in May (from May 2019 to May 2020)
- New listings rose 47.5% (from April to May), indicating that many people sitting on the sidelines were starting to come back.
As we got into June 2020, the market is getting close to normal. Some are calling this a delayed spring for the Toronto Real Estate Market.
- June 2020 sales were 75% of June 2019 levels
Following are some articles highlighting our Post-COVID Market:
So why has the Toronto market not been affected and why is it heading towards a busy season again?
- The financial impact of COVID-19 has disproportionately hit the younger and part-time workers, who were less likely to be in the market in the first place (as buyers or sellers). This means that, for the most part, buyers who were intending to buy prior to COVID-19, still want to buy now and are getting back in the market. Sellers still want to sell.
- Interest rates are at record lows with lenders offering competitive rates (less than 2% in some cases)
- Spring and Summer are the busiest seasons in the Toronto Real Estate Market. The pause during March and April has created a massive backlog and people are eager to continue with their pent-up real estate plans.
In summary, the impact of COVID-19 was that it simply pushed back the timeline on the 2020 year. The buyers and sellers are still there and are starting to take action again.
Furthermore, to add to the resilience of the market, Toronto is a world-class city but still young. It is one of the last places in the western world that is still open to immigration. In the future, expect Toronto to become like other densely populated cities of the world (such as present day London and New York). The rising house prices will reflect this.
Is now a good time to buy Toronto Real Estate?
Now is actually the BEST time to buy. In our opinion, the Toronto Real Estate market has bottomed out in prices and is already picking up. As things start heating up further, expect price appreciation and further competition from other buyers.
Why the Toronto Real Estate is behaving the way it is now hopefully makes more sense.
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