By: Mark Allen and Ari Armani

COVID-19 And the Toronto Real Estate Market

Tags: Budget, Toronto, Housing, Economic Growth, Markets, Real Estate, Investing, COVID-19

 

Toronto Real Estate Market Amid COVID19! Prices were UP 14.5%! WHY?! (April 2020)

 
 
 
The CoronaVirus effect on Toronto’s real estate market was huge! We’ll see the perfect image in the months to come. There has been a lot that happened in the past month in Toronto’s real estate market during COVID19 pandemic.

April 2020 began with people in quarantine, and practicing physical distancing ( social distancing)! Many people had to start working from home and adapt to the new lifestyle! Some others unfortunately had to close their businesses temporarily. And some had to work less hours. This is a new experience for many, the physical distancing and #StayHome got a new meaning. Our generation will not forget this time! Maybe we’d reference this period as before pandemic and post pandemic! #prepandemic & #postpandemic

The important role of real estate during COVID19 (Novel CoronaVirus):

It is very important for many to know what is going on in the markets. Especially the real estate market. Real estate market in Canada, and in TOronto has been a major player in our GDP. It’s not only real estate’s contribution to GDP that is important, but it’s roof on head for many, and or the retirement savings for many others! It is and has been one of the safest investments in the whole history!

Below you’ll read about the CoronaVirus (COVID19) effects on Toronto’s housing market, and Condo market and real estate.

Toronto Housing Market Overview, Sales up 12.3% and Prices up 14.5% YoY:

This is important to know that the sales numbers for the past month are a mixture of a good month and a slow month! The first two weeks of March was a hot seller’s real estate market in Toronto, yet the second half people started practicing physical distancing and less transactions happened! So it’s important for you to look at the numbers with that in mind!

April 2020 has started with a total of 8,012 resale transactions reported through TREB’s MLS in Toronto’s real estate market. That is a 12.3% increase in the number of sales compared to last year in similar time in Toronto’s real estate.

Also the average home price in the Greater Toronto Area (GTA) has been $902,680, which is a 14.5% price increase Year over Year in Toronto’s housing market!

How CoronaVirus (COVID19) affected Toronto’s real estate Market:

The CoronaVirus (COVID19) effect in the capital markets was heavy in March. Toronto Exchange Composite Index dropped to the lowest on March 23rd, to 11,228.49! The same thing happened to the Dow jones Industrial Average, which went down to 18,591.93!

On the other hand, the real estate market was going strong through the first two weeks of March in Markets such as Toronto, amid all the fear. I, as a Toronto Real Estate Agent and investment analyst, have seen investors entering the real estate market when the forecast of the stock market seems volatile beyond their tolerances. Good to point out Gold and Silver Markets as well. Silver and Gold had a huge surge in the past month as well!

Toronto’s Real Estate Market though was different! Capital markets can be manipulated easily, but the real estate market is harder to manipulate! People will need a roof on their head, but they can live without having Apple or ZOOM stocks! Thus we still see transactions happening in Toronto!

As a Toronto Real Estate Agent, I believe these numbers are not reflecting the whole image. I predict that next month will show us the reality of the market! Because the first half of the last month was a great seller’s market yet the second half market slowed down. So the monthly averages are not a great indicator. That’s why I use the below analysis:

The Real CoronaVirus (COVID-19) Effects on Number of Real Estate Sales (Sales down 15%):

In the City of Toronto (416 areas) between March 15th to March 31st, the number of the properties that got sold was 1,248. The same period in 2019, the number of sales were 1,442. That is 15.5% down from 2019. But is that all? No. Let’s look at another number!

In the same period of time in the city of Toronto ( March 15th to 31st) 2,461 properties got listed. The same period of time in 2019, the number of listed properties were 2,766! Which means the number of listings were down 12%!

Do you see what’s happening here? What’s your takeaway?

That shows even though the number of properties sold were 15% down, yet the number of listings also dropped by 12%. What does that mean? It means that the demand ( buyers) are less, or sitting on the sidelines, yet the supply ( sellers) are also not listing and holding onto their assets! So that means the real estate prices are not gonna see a huge plunge! Those people who MUST sell are selling, and those buyers who MUST buy are buying.

Those who have been in the real estate game know that, when the market goes south, you gotta hold onto it just for a longer time to get back up! So those sellers who don’t need to sell, usually hold onto their assets for the market to rebound again.

CoronaVirus (COVID-19) Effects on Number of House Showings in Toronto:

Our online booking system records the number of showings that were received. We have compared the number of showings in March with the number of showings in February.

 

As you can see, the number of showings in the second half of the March has dropped by 66% compared to the first half of the March. And by looking at the below graph, you’ll see the same comparison, but between March and February. Purple graph is the showings distribution per day in March. You can see a significant drop in the second week of March.

Note: It’s good to remember that real estate in GTA has been a safe long term investment for many. Speculators also have enjoyed the waves here and there, but one important thing to remember is that the buyers who drive the market are not all speculators. They are First buyers, Up sizers, or downsizers, who actually need a roof for living.

What will happen to the markets if the CoronaVirus gets controlled:

If the CoronaVirus gets under control in Canada, i.e, they find a cure for it or somehow control it, the confidence will get back to the stock market. If we look at the lessons learned from SARS, we’d realize that the CoronaVirus will be controlled at some point, that’s when the markets would start rising again.

After analysing many indicators in the market, I think in the next few months the real estate market in Toronto and equity markets will experience a plunge. I predict a few more months to come with a slower real estate Market in Toronto, but after this pandemic gets closer to its end, I predict a very quick rebound.

The rebound would be very quick, as people will at some point realize that the real estate will go up again, so they will panic, this time not from the virus, but from missing out. The FOMO will get back to the market. And I predict that the Rebound would be much quicker than the plunge.

I strongly recommend that you set a strategy with your agent now, for after this pandemic gets under control.

How Bank of Canada decisions affects Toronto’s Real Estate Market, ( the rate cut amid CoronaVirus ):

If you followed the news a couple days ago, you might have seen that BoC reduced the overnight rate. Which big banks are not clear if they are gonna pass it on to the consumers or not. So Mortgages still are not clear that would become more affordable or not! Also the stress test would be amended in April, however, many experts would say that won’t change the affordability level extremely!

All in all, I think it certainly gives a little bit of confidence to buyers, but I think the market will go into a correction regardless of the interest rate cut! After the correction however the rebound will be quick. Brace for that time!

General Supply and Demand levels in Toronto’s real estate market:

Active listings and Month of Inventory, are other indicators to keep an eye on. We started April 2020 with a total active listing of 10,676 which is drastically down from last year’s 14,004 listing’s in the same month. That being said, the Month of Inventory (MOI) decreased to 1.3 Months of Inventory in all property classes in the Greater Toronto Area’s real estate market.

 

Toronto’s Housing Trend and Charts ( past four years):

The below charts and numbers provided are for the Greater Toronto Area. For more information please contact us.

Average Home Price Toronto - March

Average home prices in Toronto had an increase of 14.5% to $902,680:

Toronto Homes Average Price-march



1 Message Us On Facebook Message us on Facebook!
close