December 14, 2021 | 2021 Year in Review
2021 certainly had a few surprises and big pivots, but let’s be honest, it was nothing like the roller coaster of 2020. That doesn’t mean 2021 was not an easy year to predict. By the end of 2020, we were still very unvaccinated, restrictions were stricter, and the remote work revolution was well under way. Still, it was not entirely clear what would come next. People were squirming to get on with their lives, and real estate was one way to do that for many of us. The 2020 fear that Covid would tank the real estate market completely evaporated by 2021. In fact, 2021 would prove that Covid would do what many could never have imagined – Make real estate even hotter.
So, what were some of the trends in 2021? Let’s have a look…
THE TWO PARTS OF 2021
The market functioned differently from January to May of 2021 than from May to December of 2021. It’s true that things tended to be very, very competitive in the winter and spring of 2021, but more than that there were a lot of transactions, and a lot of inventory coming to the market in Toronto and much of Canada. To be honest, it was a good time to be in real estate sales because there were many more transactions. The people who had held back selling their properties in the spring of 2020 because of Covid, came to the market in the summer of 2020 all the way to the Spring of 2021. It was a long frenzy of buying and selling that spanned almost a year. More buyers and more sellers. Many more transactions in the spring of 2021 than in any other spring ever in Toronto. Then things calmed down considerably. I’m not suggesting that prices cooled off. Quite the opposite, particularly for houses. After May of this year, there was far less inventory. The summer seemed more tame, and then the fall had far fewer listings come to market. This means fewer options for buyers. It was a little frustrating for them since there were fewer purchasing options compared to the first half of the year.
REMOTE WORK JOY AND REGRET
The huge exodus in 2020 to bigger spaces continued for the most part of 2021 whether it was larger property in the city or outside of it. Price increases were bigger year over year in suburbs and small towns outside of the city than in Toronto, sometimes in small towns that didn’t really have big price increases before. Remote work is still working itself out in 2021. Some of the change is permanent, but I’m already hearing about the feelings of regret – the folks who left for the quiet beachfront in Nova Scotia only to long for the the dynamism of the city. I’m not sure this means people will be returning back to Toronto after they have left, but I do think it may prove to be a cautionary tale for some folks who left the city. Now, don’t get me wrong. There are those who want to move to Kitchener for work or to be close to family or to have a backyard for their kids/pets or even to Nova Scotia, because they do want a quieter life. They would have made the move regardless if Covid came along. But I’m talking about those who had more of an emotional response. They said: What are we doing in the city if we can’t really enjoy it. So, they moved very far away from their friends and family to feel isolated and bored.
THE RENTAL BOUNCE BACK
In 2020, rents were dropping like a stone to the joy of many renters and to the lament of many landlords. When the bottom was reached in February of 2021, rents began to go up again with a more accelerated rise in the summer where rents became more competitive. Rents are nearly back up to pre-pandemic levels now in most markets. Of course rents do follow a fairly cyclical pattern, more so than the sales of properties. In other words, things really slow down with rentals in December and January. People tend to move more in the warmer months. Still, 2021 was a bounce back year for rents in Toronto. Even more outside of the city.
Some of the big issues around Toronto Real Estate before Covid are still here after Covid has been with us a few years. Some attempts to cool the market were introduced this year, including new legislation to include affordable housing into any future Toronto condo project. The success or failure of this is yet to be seen. Affordability is a pressing issue, but this new legislation may just result in condo builders building less buildings in Toronto, and limiting new supply, causing even more stress on affordability. But, you never know. It would be great if it works. I suspect the better route would be to create more supply and better transit to move people in and out of the city. Such plans take a long time, however, and may not satiate people who want things to happen quickly. For 2021, affordability was still a problem for many. Plans were made, but nothing really changed.
THREAT OF INFLATION
Mortgage rates remained incredibly low for 2021, and that spurred a lot of interest to spend money on housing. It was like a Black Friday event for mortgage rates that were very low all year, but won’t be low forever. Fixed mortgage rates have gone up toward the end of this year once the government signalled they would stop with their quantitative easing plan. Variable rate mortgages have not gone up as much as fixed rates this year. I suspect mortgage rates will go up for fixed and variable in 2022. Inflation will make sure of that. Rates won’t stay down. I don’t think we’re returning anywhere near the double digit interest rate increases of the 80s and early 90s. Nothing like that. But rates are very low. They really can only go up, especially with inflation
With 2021 almost in the rearview mirror, we will look ahead in the next blog to see what may be in the works for Toronto real estate in 2022. But that is for the next blog. If you want a better idea of what interested my Toronto real estate blog readers in 2021, here are my top three blogs of the year!