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 and ghost auctions.
The Toronto Regional Real Estate Board (TRREB) recently reported that home sales in the Greater Toronto Area surged 40.3 per cent 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 the GTA was $951,404, up from $792,134 last year.
Sales of detached homes increased 50.6 per cent, semi-detached houses rose 66.8 per cent, and townhouses climbed 45.8 per cent. Condo apartment sales did advance last month, but at a slower pace: 10.9 per cent.
Why Are Toronto’s Real Estate Prices Still So High?
These housing boom conditions might seem confusing since there was an 11.5-per-cent 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, says TRREB president Lisa Patel.
“(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,” she said in a statement.
Jason Mercer, the board’s chief market analyst, explained that “market conditions remained very tight in the GTA 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 GTA housing market forward. The Canadian economy created more than 245,000 new jobs in August, average hourly wages year-on-year rose six per cent, and the gross domestic product grew 6.5 per cent in June. Canadian consumer confidence is returning, leading to a hyperactive GTA 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 per cent. Plus, the Central Bank cut its benchmark five-year mortgage rate to 4.79 per cent, the second rate cut in three months. During the July policy meeting, BoC head Tiff Macklem also signaled 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.
Whether this dip in demand for Toronto real estate impacts prices in the long term, TRREB CEO John DiMichele still believes that it is in the best long-term interest of homebuyers that more housing supply comes online within the GTA.
“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 the GTA moving forward and keeping the region competitive in attracting businesses and talent from around the world,” he said in a news release.
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.