The COVID-19’s impact cannot be played down at any cost. Apart from affecting the global Economy (including that of the United States, People’s Republic of China, the European Union, and others), it has affected Canada in multiple aspects, real estate in particular.
The impact of the COVID-19 on the Canadian Economy and Canadian cities’ housing markets has been monumental. The spring season was a bit cold compared to past years, but record sales were observed in the summer.
Toronto’s market remains stable. Interest rates currently are at a historic low, and rents for most housing units decline. This indicates that making a move in real estate right now is the perfect time to do so.
What impact did the COVID-19 have on Toronto’s real estate market?
Without any doubt, Toronto is Canada’s financial and business capital, and the city has all ethnicities of the world (all) literally. The onset of the 1970s saw the city receive immigrants from all around the world. By the late 2000s, more than 49.1% of the city’s population was foreign-born.
A unique aspect of the city’s urban planning is mixing apartment buildings in residential lots to curb urban sprawl. After the 1990s, the sprawl began to spread towards cities and towns like Mississauga, Brampton, Vaughan, Richmond Hill, Pickering, Oakville, and Oshawa, the city’s urban planning is still the best of any large city.
The latest figures from the Toronto Regional Real Estate Board (TRREB) reveal that many Torontonians leave inner-city areas for homes in the suburbs. Some go to areas near holiday cottages and farms for what they term as ‘peaceful living.’ It also indicates that sales are rising in the 905 area (near the city) in comparison to the 416 area (city center).
According to experts, the reality of all this is quite complicated. Moving to the suburbs, or exurbs has been a trend affecting the Greater Toronto Area (GTA) real estate market among a specific demographic. This is also due to Toronto’s expensive real estate market. This trend has intensified due to the COVID-19 pandemic.
A survey carried out by the Mortgage Professionals of Canada in August this year among Torontonians revealed the following reasons for purchasing a home in the suburbs/exurbs instead of a condo are as under:
- 28% of respondents said they want to live in a more immaculate home.
- 14% revealed that their current home is no longer suitable.
- 14% revealed that the current situation is an excellent time to get a good deal on a home.
- 12% stated that low-interest rates make it a perfect time to buy a home.
- 11% stated that they want to live in the least expensive place.
A vast majority of millennials are renters of Toronto condos, and they see a sharp fall in interest rates as the stepping stone to owning a home. The same phenomenon is also seen in other towns and cities other than the Greater Toronto Area (GTA).
Is right now the best moment to make a move in Toronto’s real estate market?
Here are some factors to prove that right now is the best time for Torontonians to make the best real estate move:
Reduced interest rates
Thanks to low-interest rates, mortgage rates across Canada are experiencing an all-time low. HSBC Canada has reduced its five-year fixed mortgage rate to 1.99%, which has broken Canada’s 2% barrier. Depending on the buyer’s/resident’s situation, a drastic cut in these rates can mean massive savings for them.
With the Canadian Economy recovering amidst easing COVID-19 induced restrictions, it projected that economic activity would bounce back quicker than expected in the third quarter. The Bank of Canada indicated that it might keep these rates historic low in supporting economic recovery. This is itself a good omen for those who want to buy a home, refinance their mortgage, or amalgamate their debt.
There is relief in the rental market
Short-term rentals were banned for the pandemic duration, forcing landlords and property owners to list their short-term rental properties as long-term rental properties (Airbnb ones included). Consequently, inventory grew as prices fell.
Evens students moved out of the city too. This trend was witnessed in the previous couple of months due to a drop in employment rates. Meaning, no one could afford to live in Toronto without a steady income (as it is also ranked among the world’s expensive cities to live in).
It was announced on September 17 that rental prices wouldn’t increase from January 2021, and will be kept that way up to December 2021 to help unemployed tenants pay rent with ease. It is relatively early to predict if rents will remain low, but those who wish to get a property for rent in the city should know the time to make a move.
A summer of record-breaking home sales
When the market was put on hold due to COVID-19, buyers were on the sidelines, which resulted in an upward surge in home sales in the summer when restrictions started cooling off. The pandemic moved the busy spring season of real estate through the summer as housing prices in the Greater Toronto Area (GTA) broke records in July and August.
The market saw a surge of condo listing too. Other than that, buyers were vying intensely for both detached and semi-detached homes.
Tightening of the detached housing market and softening of the condo one
Both detached and semi-detached homes were selling like red hot properties. Two reasons led to this: 1). People are becoming comfortable working from home, and 2)—residents looking to buy decent homes outside the city.
The months of July and August saw the highest recorded numbers for prices in these segments. The same period also saw tight competition due to low inventory.
While on the other hand, listings for condos outstripped the sales, which resulted in balanced conditions in the condo market. This was further reflected in a slower pace of price growth in this segment. However, condos prices did not drop as selling prices for them in Toronto grew by 17%, and listings were raised by 25% compared to the previous summer.
For the city’s (and country’s) Economy, it is a good sign, but for new buyers dreaming of having their own home, the sign is worrisome.
The immigration factor
Canada’s population is seeing its slowest growth since 2015 and due to the COVID-19 pandemic too. With supply and demand in misbalance due to border restrictions, housing markets of other cities like Calgary, Edmonton, Montreal, and Ottawa have been affected because of this.
Despite the decline in immigration, Toronto’s market is steady and resilient due to monumental competition to the limited supply.
Selling prices have risen
Amid unemployment and a record wave of bankruptcies, a surge in selling prices has been observed. When the pandemic started, there was speculation that there would be a drop in housing prices, but that was not the case with Toronto’s market. Low-interest rates and a rise in activity from buyers and sellers are likely the reason for continued competition in the city’s real estate market.
The Canada Mortgage and Housing Corporation (CMHC) has tightened borrowing rules, yet the market booms. Another reason for this may be residents’ self-isolation, and the fact that inner-city residents were living in was not enough.
It might also be that sellers drop a home’s price when it isn’t getting sold. However, this has not been the case as it has been proved that sellers are waiting for the right price to sell their home.
Conclusion
Even though residents are now shifting towards suburbs, Toronto’s housing market is still red hot and is gaining momentum. Housing prices are not falling right now but can fall soon. A large part f this phenomenon can be attributed to COVID-19’s impact on the market itself. Also visit https://theasianposts.com/
