Though it is still early to tell whether Toronto or Ontario will have a second or even third wave of the coronavirus, we now know that it could happen. Right now, we are seeing that some countries in the world are already showing signs of a second wave. Singapore, one of the most diligent and organized responses to the pandemic saw a second wave. If there is a second wave that is strong enough here in Toronto, there is a chance we could see a subsequent quarantine again.

Now, before we become too dire, let’s remember that even with a subsequent wave, there will still be a point in the future where this pandemic will end, likely with a vaccine in a year or so, possibly sooner. Still, a second wave may lead Toronto in a different direction in terms of real estate than a virus that does not have a second wave. With a second wave, you have a longer time of insecurity and distress on the economy.

What will Toronto real estate look like with a second wave and a longer pandemic?

MORE OF A BUYER’S MARKET

Let me state right off the top: Even with a second wave, prices won’t likely collapse. So, if you are one of those buyers who are expecting bargain basement prices, you may need to adjust your expectations. That said, with a second wave and a longer time with this virus, there may be softening in the Toronto market by about 5-10% (maybe more or less at various times) for about a year or until the time where confidence returns to the market and a vaccine is hopefully under way. Buyers could still be happy that they may finally get a break. The softening may be deeper depending on what housing type you prefer and what market you are interested in. The higher end of the Toronto real estate market will likely take a bigger hit. The starter home market will likely take a smaller impact. Even if we look at Toronto’s April numbers we can see that condo apartments are only down 2.5% from last year. And remember there was no quarantine or restrictions last year. Single family houses, often the more expensive option, were down 7.8%.

FEWER CONDO COMPLETIONS

I think this is already happening, but with a second or third wave, we may see the number of condos completed in Toronto stalled again. We were expecting just over 30,000 units completed in Toronto this year, a very high number compared to other years, but we won’t hit those numbers. With the supply chain disruptions, we will likely see builders having a harder time receiving their supplies on time. If, for example, a builder is bringing in marble from Italy, it may be delayed. Then there is also the restriction in construction when we have been under quarantine. Most of these completions will take longer. So, we may see fewer new properties arriving in Toronto this year.

MORE TURBULENCE IN THE RENTAL MARKET

In residential real estate, the rental market may take the hardest hit. The impact of the economy has largely been felt by part-time workers and lower income workers. They are far more likely to be renters. There are also much more condo rentals available because of the increase of AirBnb short-term rentals switching to long term rentals. Home owners in Toronto largely did not lose their jobs or sacrifice income in the same way as renters did. Also, many new Canadians who become homeowners, start as renters. Immigration will be reduced significantly until Covid-19 is under control.

PEOPLE WON’T GIVE UP HIGH DENSITY

Let me tell you what won’t happen. There’s been chatter that people will leave dense city living to return to low density living, but there is still an affordability issue for this. People would need to travel pretty far to get a property with low density and a lot of space. I don’t think the lifestyle of the city will be switched up for a suburban life with more space in a year or two. Once this is finished, commutes will be painful once again.

PRICES MAY RISE AND FALL DURING THIS PERIOD

Don’t expect a slow drop in prices then a rebound with several waves of infection. I suspect prices may rise and fall, then rise and fall some more, depending on the economy at large and how we feel we are doing in the pandemic with each wave. Softening prices may be closely matched to a rise in Covid-19 cases and any quarantine measures. Coming out of a wave, we may see prices uptick some. With a second or third wave, we may not see a recovery until 2021 or 2022. According to Benjamin Tal, we will enter a recessionary recovery. In other words, if we had 5 % unemployment before Covid-19, and we are around 14% now, we will end up around 8% at the end. Many people will return to their jobs. We will have a much larger deficit, though Canada is in better shape than most Western countries to pay it off.

So, if we have a second wave and this pandemic stretches on for a year or longer, then we will likely see a softening of the Toronto real estate market with periods of peaks and valleys. It could be a better time for buyers to make their move as long as they are not sacrificing their health and safety. Though I still think anything could happen, I believe it is more likely that we will see some softening in Toronto real estate prices if we have subsequent waves of Covid-19. I don’t think we’ll see a collapse like we saw in the U.S. in 2008. Still, it could be a very different market than we’ve seen before Covid-19.