Pent-up demand, historically low-interest rates, and a low supply of listings have lead to a surge in sales activity and home prices throughout the Toronto-area since the peak of the pandemic.
In fact, it was the best September on record for home sales in the Toronto-area, with 11,083 sales closed — up 42.3% compared to the same time a year ago — while the average price of a home sold in the region climbed more than 14% year-over-year to $960,772, according to the Toronto Regional Real Estate Board (TRREB).
But as we gear up for the second wave of COVID-19, it makes you wonder if Toronto real estate can sustain its current levels of activity as we dive further into fall.
RE/MAX considered this very query in its Fall Market Outlook Report, which predicts that Toronto housing prices will increase by 5% during the remainder of 2020 as demand is expected to exceed supply and lower interest rates will continue to lure more people into the market.
That said, one exception they point to is the local condo market. The continuing presence of COVID-19 combined with the seismic shift in the short-term rental market could impact condo prices, despite recent gains. RE/MAX says it’s becoming more apparent that residents are fleeing the city to relocate to more rural communities in search of more space and affordability. What’s more, the aforementioned short-term rental market, including Airbnb, “has collapsed.”
“Condo owners are either turning their units into long-term rentals or selling their properties.” And while hundreds are hitting the market right now, thousands more are expected to do the same once new construction is completed over the next two to three years.
As a result, RE/MAX says supply could soon overwhelm consumer demand, leaving both condo prices and rents to decline in the coming months, also noting that low-interested rates are impacting the condo market — albeit not for the “right reasons.”
With borrowing costs currently at historic lows, thanks to the Bank of Canada (BoC) slashing interest rates to near-zero and lowering the five-year mortgage rate to below 5%, families are upgrading. Recent demand in the 905 region also points to a desire for more space from buyers.
As we fall deeper into the fall season, RE/MAX believes the impact of the coronavirus, consumer trends, and the economy will be felt over the coming months.
And while it may have once seemed that the condo sector would rule the Toronto housing market — as it has before — RE/MAX believes the segment may be experiencing a “slow-down,” especially with buyer’s market conditions currently in place.