Toronto Real Estate 2020: A Wild Year in Review
By now you have probably already heard how well the Toronto Real Estate market performed in 2020. Sales were up 8.4% from 2019, bouncing back from the slow down experienced in 2018 and 2019. The GTA’s average price rose to $929,000 – a new record, up 13.5% from 2019 and 13.1% from previous highs attained in 2017.
However these statistics hardly tell the tale of 2020. The reality is the year was wildly volatile and 2021 could be in for more of the same. Market conditions changed so rapidly that it seemed irrelevant to write about them throughout most of the year. By the time you wrote, edited and published something with any thought, the market had already changed.
The pandemic created an urgency to act when it came to housing. Here are the three major influences on the Toronto Real Estate market in 2020.
Housing Mattered More: While your home has always been an important space, not going to an office, restaurants, or basically anything fun you can think of, increased the amount of time we spend at home and, as a result, the importance of that space. For those whose employment wasn’t impacted, life under lockdown probably had a positive influence on their savings accounts. This, combined with a new found need for more functional space meant Buyers were both willing and able to spend more on their homes.
Housing went from being an affordability driven purchase to a need for more and a willingness to push our budgets: our house became the place we live, work, teach, and our backyard is where we gather – at a safe distance – with friends and family. Toronto last experienced a trend correction of some magnitude in 2017. Then Buyers quickly shifted course from Buying Detached homes to more affordable condos that minimized commuting time and costs. In 2020, things changed course again. House size and property along with neighbourhood started to matter more, and people were willing to pay for it. Prices in suburbs, small town Ontario, and cottage country rose dramatically, and downtown condo prices fell.
The Downtown Exodus and Halt to Immigration: The numbers are in and Toronto’s downtown core has fled to rural Ontario, the suburbs, cottage country, and smaller provinces. Can you blame people? Toronto’s desirable and vibrant downtown became a place people didn’t need to be and outsiders started to fear. New work-from-home measures eliminated commuting for many and the need or desire to live downtown plunged.
As borders closed, both immigration and permanent residents slowed to a fraction of what Canada typically experiences. Further hollowing out Toronto’s core and turning Toronto’s rental market on its head. Toronto’s vacancy rate skyrocketed from its ultra tight 1% to 4.6% causing landlords to compete for the tenants they were used to turning away.
These impacts could be felt for decades. Purchasing a property is a long term decision for most people, so this could have positive economic impacts on smaller Ontario communities for some time. Toronto and other major urban centres will have to find ways to rebrand, and while cheaper rent and condo prices will help, clearly, building neighbourhoods and housing that suits our new lifestyle will be a priority. Covid will eventually pass, but its influence on how we live and work will be long lasting.
Government Supported Close to Everything: Mortgage Deferrals, Commercial Rent Subsidies, Government Loans, CERB, Interest Rates Cuts, Bond Buying, among other efforts, left some Canadians feeling better off financially with the pandemic then without. Whether or not you support the government’s economic response to COVID, we are fortunate to live in a country that made efforts to support citizens in need. While I hope the government’s approach going forward is more targeted, unprecedented times call for unprecedented measures.
Even with government intervention many experts were anticipating job losses and mortgage deferrals to have dramatic impacts on housing. One of Canada’s most influential housing organizations CMHC called for prices to drop 15% while the opposite actually took place.
In a way Covid has turned decades into years. Trends like working from home, which were slowly gaining momentum hit warp speed thanks to the pandemic, allowing employers and their employees to see the pro and cons of this different arrangement. The pendulum has swung away from downtown living for now. An imbalance and shift in prices in one area creates appeal and opportunity in another. Prices increasing outside the downtown could cause condo living to look more affordable and so the pendulum will eventually swing back. Here are a few other lessons from 2020.
Lessons From 2020:
Toronto’s Rental Market can go down! We quickly learnt that Toronto’s rental market isn’t impenetrable. Toronto experienced vacancy rates that most wouldn’t have thought possible for the city, with vacancy rates quadrupling and rents dropping in the 20% range. Though it feels like we may have found the bottom as we start 2021, investors who bought condos with negative cash flows may be regretting their investment strategy at least for another year or so.
Don’t underestimate government intervention. The lengths governments will go in support of current systems were put to the test in 2020. Whether or not you agree with the action taken doesn’t matter, its impact will be the same. Understanding its effect and how government is likely to react will lead to better decision making.
Windows of opportunities aren’t going to be as wide as you think. The Real Estate market started to tumble as we went into lockdown in the middle of March. However, it only lasted a couple of months. By July the market was back with an unexpected amount of demand. Most would have expected a global pandemic to offer a larger buying window then 2 months. The lockdown this winter is actually having the opposite effect. Demand has been stronger then normal while many Sellers are reluctant to list their property. While fear should play a role in your decision making, it’s important not to let it overwhelm you. Things are not likely as bad or as good as we tend to make them seem.
Appreciate the small and simple things in life. Having an outlet that isn’t dependent on anyone or anything else proved to be an important coping mechanism this year. We were all forced to enjoy some of the simpler things in life in 2020 and I hope to carry this forward.
It’s a long winter and for many, our mental health is pretty fragile right now. If you are feeling low, please talk to someone, call me. Get outside, check out a new park, some great architecture, do something!
