Canadian real estate has been remarkably resilient in the face of COVID-19, but despite record-breaking home sales and continued price growth across many markets, the Greater Toronto Area’s condo segment hasn’t emerged completely unscathed. But it’s not all bad news.
What shocked everyone in the wake of the pandemic, is despite the lockdown and its economic aftermath, housing prices continued to rise. Market matchers predicted declines and bursting bubbles—forecasts that have not yet materialized as we approach the end of 2020. While the prediction was contested by RE/MAX, nobody could have foreseen what’s actually transpired.
Data released by the Toronto Regional Real Estate Board (TRREB) reveals that home sales in the GTA in October 2020 were up 25 per cent year-over-year. Prices followed suit, reaching an average $968,318. The average detached home now carried a price tag of $1,204,844, a 14.8-per-cent increase year-over-year. The housing market’s rapid return in the summer months can be attributed to pent-up demand from the delayed spring market, coupled with severely limited supply, low borrowing costs and a slow but steady economic recovery. The continuing strength through the fall speaks to a broader trend of growing demand overall which is likely to continue.
Meanwhile, condos in the 416 were the only property segment to see a decline in sales and a plateau in prices, which increased just 0.7 per cent to $622,122 year-over-year in October.
This is certainly a far cry from the condo sector’s meteoric growth over the last decade. As the price of detached homes reached record-breaking highs time and time again, an increasing number of homebuyers sought condos as a viable option for ownership in a city where “home” was quickly becoming an unaffordable, unattainable dream. As demand for condos grew, so too did their prices.
By the same principles that previously prompted skyrocketing housing prices (which continues to be the case across the detached housing segment), condos have lost some of their lustre. Demand has waned due to the halt in immigration, business and tourist travel, stricter short-term rental rules and a shift in consumer demand toward larger suburban homes.
Indeed, condo market research firm Urbanation reported a vacancy rate in the GTA of 2.4 per cent in Q3-2020, which is three times higher than it was in Q3-2019, and the highest in the last 10 years. Those investors who were once accused of monopolizing the GTA’s lucrative condo market and driving up prices, were now flooding it with listings thanks to long-term uncertainty.
According to TRREB, new condo listings coming on stream more than doubled in October 2020 compared to year-ago levels, and sales were only up 2.2 per cent over the same period. If this trend were to become more pronounced, prices may start to decline. But that’s just speculation at this point.
What we’re experiencing right now is a softening GTA condo market. This is not a bubble on the verge of bursting, but a slight deflation. And this could be the break first-time homebuyers and young families need, in order to achieve ownership in this pricey market. From an end-user’s perspective, current market conditions mean more choice, less competition and a real chance at a secure place to call “home” at a price they can afford. For investors the view may be dimmer, but there is light ahead.
Borders will eventually reopen, travel and immigration will resume, and the world will return to a version of its former self. In the meantime, right now is the best opportunity to buy a condo in the GTA in years. There’s lots of inventory, which means great selection for buyers with room to negotiate. Before COVID-19 closed borders, Canada was welcoming roughly 300,000 new Canadians every year, which carried a substantial demand for homes. Those numbers have been cut dramatically due to restricted travel and immigration; however, the federal government recently announced its intention to increase immigration to Canada by 1.2 million newcomers over three years as part of its 2021-2023 Immigration Levels Plan. In my humble opinion, Canada—and specifically the GTA—is still among the best places in the world to live.
Christopher Alexander is the executive vice-president and regional director of RE/MAX INTEGRA Ontario-Atlantic Canada. Christopher is responsible for all areas of day-to-day operations including franchise management, membership services, training and development, marketing, advertising, promotions and finance.