It might be hard to believe, but it has already been six months since the coronavirus pandemic forced Canada into lockdown. Despite the progress that has been made in the wake of the public health crisis, COVID-19 has severely disrupted the national economy and the country’s finances. It might be a couple of years until the Great White North returns to pre-pandemic levels. That said, Canada’s long-term economic outlook is generally optimistic. You only need to look at various parts of the nation to see how a lot of the sectors are rebounding – such as the Toronto real estate market.
One glance at real estate prices in Canada’s largest city would leave many of us asking: did Toronto even go through a pandemic? Whether it is the renewed sales activity or climbing prices, it has been an extraordinary and swift recovery for the Toronto housing market. The short-lived promise of a COVID-19 discount is long gone, and the city has returned to bidding wars.
The Toronto Regional Real Estate Board recently reported that home sales in Toronto surged 40.3% in August compared to the same time a year ago. Last month, 10,775 home sales were made, up from 7,682 in the same month last year. According to the real estate board, the average price of a home sold in Toronto was $951,404, up from $792,134 last year.
Sales of detached homes increased 50.6%, semi-detached houses rose 66.8%, and townhouses climbed 45.8%. Toronto condo and loft sales did advance last month, but at a slower pace: 10.9%.
Why Are Toronto’s Real Estate Prices Still So High?
These housing boom conditions might seem confusing since there was an 11.5% decline in employment growth in Toronto. There are, however, a set of key factors to explain why North America’s fourth-largest city continues to witness incredible growth.
Typically, the real estate market is not as active during the summer because more households are on vacation, postponing their home sale plans until the fall. However, with travel restrictions and an economic downturn, more people stayed home, which this has been a boon for the housing market.
Fewer households have chosen to go on vacation as a result of COVID-19 and instead have remained in Toronto and been active in the housing market, satisfying pent-up demand from the spring.
Market conditions remained very tight in the Toronto resale market last month. Competition between buyers was immense for low-rise home types, contributing to higher price growth.
Improving economic conditions have also propelled the Toronto housing market forward. The Canadian economy created more than 245,000 new jobs in August, average hourly wages year-on-year rose 6%, and the gross domestic product grew 6.5% in June. Canadian consumer confidence is returning, leading to a hyperactive Toronto housing market.
Low borrowing costs continue to be a driver of rising housing prices. Earlier this year, the Bank of Canada (BoC) slashed its interest rate to 0.25%. Plus, the Central Bank cut its benchmark five-year mortgage rate to 4.79%, the second rate cut in three months. During the July policy meeting, BoC head Tiff Macklem also signalled that there would not be a rate hike until 2023.
The Future of Toronto Real Estate
Many questions linger surrounding the future of Toronto real estate. For instance, is the exodus from large cities significant enough to impact home prices? A gradual trend that the real estate industry is noticing is a growing number of people fleeing urban centres for rural areas. In the coronavirus world, more people are working remotely from home, which means they no longer need to limit their housing options to proximity to their place of work. With the virus outbreak largely concentrated in hyper-dense locations, families are also wary about living in big, crowded cities. And, of course, prices continue to be a significant factor driving homebuyer preferences.
We have to focus on supply both in the aggregate and in terms of a greater diversity of home types. This will be key in addressing housing affordability in Toronto moving forward and keeping the region competitive in attracting businesses and talent from around the world.
COVID-19 has changed everything, from housing trends to consumer preferences to monthly activity. What other developments will unfold in the months and years to come? For now, the demand is vast, supply is low and borrowing is inexpensive – all crucial factors for a hot real estate market that is projected to remain the case in the fall.
“Toronto’s Luxury Real Estate Authority”