The Toronto real estate market is arguably the largest market in Canada. Also, this resilient market has not been spared from the impact of the pandemic and other militating factors this year.
This makes an insight into the current market situation an important inquisition at the moment. However, many experts say the full effect of what’s happening is still yet to play out fully.
Here is the current situation in the Toronto real estate market:
1. Sales Are on the Rise
The sales in the Toronto region are gradually picking up pace. The Toronto Regional Real Estate Board (TRREB) has reported 8,701 home sales through its Multiple Listing Service (MLS) in June 2020. This is a huge rise from the sales of May 2020, which was put at 4.601 homes. By calculation, it’s an impressive 89% increase in just a month this year.an impressive 89% increase in just a month this year.
This pattern of growth in sales had started in May. The heat of the pandemic in April resulted in only 2, 961 sales taking place. However, there was an increase in May to 4.601 sales and the growth pattern has continued in June. Compared to June 2019 the sale numbers that witnessed 8,826 sales, the June 2020 sales are just down by 1.4%.
For a year that has witnessed one of the most economically unfavorable situations, these are impressive numbers.
2. There’s A Higher Use of Technology
Due to the health uncertainty and restrictions during the pandemic, there are lesser open houses in the current market. The real estate market is now marked with higher use of technology than ever. The use of MLS, such as own the address, has become widespread as more homebuyers making purchases directly over these platforms.
New technologies, such as 360-degree virtual listings, panoramic images, and floor plans are being used to substitute for open houses. Also, the amount of paperwork goes into home deals are being reduced due to these technological innovations. Strategies to ensure proper screening and social distancing during open houses are also being facilitated through technology.
3. There are Fewer Active Listings on the Market
The total number of active listings in the Toronto area is down by 28.8% from June 2019. This has been associated with both home buyers and sellers taking slower steps to enter the market with the prevailing pandemic conditions. There’s being the undeniable fear of not getting the best prices at the moment for sellers.
Buyers, on the other hand, are discouraged from making purchases due to the lower inventories and listing shortage. When this happens, there’s a likelihood of being outbid with competing offers from other buyers. Hence, it’s only normal to see these fewer active listings until the economy is back to normal.
4. There are Much Lower Interest Rates
The pandemic situation has resulted in some of the lowest interest rates ever. Major banks across Canada are making these changes to ease the economic pressure of the pandemic on buyers. Notably, the Bank of Canada reduced its interest rates to 0.25% from 1.25%. This new interest rate is a result of cutting the interest about three times in less than a month – between March and April.
These changes are expected to drive the real estate market in the coming months. Expectedly, the lower interest rates have lowered the cost of obtaining a mortgage to buy homes. This may mean more buyers will be encouraged to make home purchases in the coming months. However, driving more sales still lies in the hands of real estate agents.
5. Prices Are Rising Again
As the economy gradually resumes, home prices have started to rise. Back in April, the prices dropped by 8.9% from $902,566 to $821,780. The market recovered a little in May to an average price of $863,607, 4.8%. The current average price is $930,869 up by 7.7 from May. This is also the highest home prices that have been in the entire year.
Compared to the same period last year, the prices are even more impressive at a 10.6% increase, from a $831,882 price in June 2019. This rise in prices has been associated with the shortage of inventory and fewer listings on the market. Both the detached homes in the Greater Toronto Area and condos have witnessed a considerable increase in prices.
6. Increasing Mortgage Problems
The rate of mortgage deferrals is on the rise in the Toronto real estate market. This has been attributed to the harsh economic conditions impacted by the pandemic. Unemployment rates are still at a reasonably high 13.7%. This has made many banks to offer up to six-month mortgage deferrals to families across Canada.
More families are being forced to rent in the face of the pandemic as they are unqualified for mortgages. This has presented a difficulty for most starter homeowners who are looking to sell since there are fewer eligible homebuyers. Fears are surrounding the collection of rent during the pandemic, which continues to make selling the preferred option.
7. Rental Rates Are Lower
The main group of people to have felt the impact of the economic crisis caused by the pandemic is the low-income earners living in rental apartments. This group of people has lost jobs, so they’re both struggling to pay rent and are not looking for new renting options. Due to this, there’s a drop in demand for rental apartments.
The drop in demand has made more landlords considerably reduce their rents. Toronto rents per square foot have experienced one of the biggest drops in rents at 9.5% less than last year. Across Canada, rental rates have dropped by 7.8% for the third month in a row due to the pandemic.
Takeaway:
The Toronto real estate market continues to show signs of resilience even in the face of the pandemic. June’s sales reports were the most impressive in years in terms of prices but slightly lesser in terms of sales numbers.
The group that’s most hit by the economic crisis remains low-income earners. There’s a general slowdown in the market with fewer listings than last year, but they’re steadily on the rise compared to the other months in the pandemic. Technology is now playing a more important role in the real estate market than ever before.