COVID19 Effect on Toronto’s Real Estate Market! (April 2020)

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

The CoronaVirus (COVID-19) 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. It’s good to point out Gold and Silver Markets as well. Silver and Gold had a huge surge in the past month!

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 Impact of CoronaVirus (COVID-19) 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 prices in Toronto had an increase of 14.5% to $902,680:

Toronto’s Hot Condo Market ( Condos up Over 17.7% YoY):

Toronto’s Condo Real Estate Agents finished the month with 2,014 condo apartment sales in the past month through the Toronto Real Estate Board MLS system. Condo apartment sales in Toronto increased approximately 2.9% compared to last year amid CoronaVirus (COVID 19) fear. Yet the average price of a condo apartment in Toronto was $658,791, which is a 17.7% YoY increase compared to the year before.

Active condo apartment listings for sale on the other hand declined. Thus, same as previous months, we keep predicting the decline in the number of active listings and also the increase in the number of sales would put a lot more pressure on the current condo market.

Condo Apt month of Inventory in Toronto is still low, at 1.1 MOI.

The Average condo apartment price in Toronto’s $658,791, which is a 17.7% increase in prices, YoY!

Toronto’s Detached Houses (Detached house prices are up 12.5% !) :

If you’ve been following our market analysis, you’d already know that we had predicted it in 2019 that “Detached houses are on the rise again” for 2020 in Toronto. CoronaVirus will affect the Detached Market in the next few months, but I think the lower end of Market ( Houses under $700K) and suburbs will not plunge significantly. Particularly suburbs, as my colleague Mark was discussing with me, his reasoning was that more and more people will work from home, so there would be many people who don’t need to stay or keep living in Toronto’s core! Which I agree with, and I think suburbs and the lower end of the detached market will not plunge significantly even amid COVID19!

Toronto’s Realtors sold 3,760 detached houses through TREB this past month. The average price of a Detached house in Toronto’s $1,107,870. This is a 12.5% hike in Detached Home prices.

The number of sales also increased by 17.4% ( total of 3,760 sales)!

Month of inventory is a good indicator that shows the OVERALL supply/demand situation in each area. It has been 1.7 MOI .

Semi-detached and Townhouses:

In the Townhouse and Semi-Detached homes market in Toronto we had a competitive market as well. The average price of a Townhouse in Toronto has been $721,006 and the average price of a semi-detached house in Toronto has been $889,480! For more detailed info about these sub markets you can contact us!

Comments and Predictions for home sellers, April 2020:

Each micro market in Toronto has different behaviours from over all Toronto’s Real Estate Market. Our real estate market report is a complete overall market update for the Greater Toronto Area. If you wanna know about your specific neighbourhood, you still need to look at the stats in your own micro pocket. For more information you can talk to your real estate agent or if you don’t have any, find a Top Toronto real estate agent in your area.

In general, if you are a seller, you might find the next few months difficult. As the market will slow down based on what I see in the market. In many sectors of the real estate market, there are going to be price reductions and price drops.

So if you need to sell, or better put it that way, if you MUST sell, list your home for sale, but with all the health and safety precautions regarding COVID19 to protect yourself and the public.

Comments and forecasts for home buyers, March 2020:

I’ve dealt with many buyers who are fearful of their job security and are sitting on the sidelines. That takes out a number of the buyers from the market. So you’ll see less competition. If you are in an urgent need of moving or buying a place, this is a good time for a buyer to hit the market.

Not with a predatory meaning, but this market is more favourable to buyers than what it was a month ago. Remember if the prices drop by 10% it would only be like 6 month ago. So I don’t expect a huge plunge. But definitely there would be more opportunities for buyers in this market!

Conclusion:

The Novel CoronaVirus ( COVID19) will have an effect on Toronto’s real estate market, whether we like it or not. However it’s important to be ready for that and what will come next. We have been preparing for this and working on new strategies for our clients to guide them with their real estate needs amid these uncertain times ( which with a look at the history, you can predict some of the outcomes).

In general you might see a huge impact in COmmercials and Office spaces. Since people will adapt to work from home, you might see that some corporations in the future give back a portion of their leased spaces. So commercial ( office or retail) will get back to the market. That will affect the NOI and Cap rates. Thus I predict a drop in the value of the commercial properties.

For the residential properties however the story is different. Some parts of the market will be affected big by COVID19, however there are other parts of the real estate market which will not be affected that much. For more details about your own area contact us through the website!

I wish for everybody’s health. Stay Safe and Stay Home! And don’t forget the Physical Distancing!