December 16, 2020 | 2020
As the year wraps up, I often review my past predictions from last December, and see how close they lined up with what really unfolded in Toronto real estate in 2020. And, at the risk of tooting my own horn, I generally do get most things right. Not this year. 2020 proved to be a year that was pretty hard to see coming from a Toronto real estate perspective, and most other perspectives too. Last year, around this time, I suggested we would have a “rosy” year with moderate price gains and little volatility. Ha! Not exactly a bullseye. This is how real estate, and life in general, can function. Something comes up that you never expected, like a pandemic, and everything changes. You pivot, and carry on.
With that said, let’s take a look back at what did happen this year. I don’t think it was the disaster some folks were expecting back in April at the start of the first wave, but it was not a typical year, and certainly not “rosy”.
Before Covid, the Toronto condo market, the rental market and the market for houses were all rising in value. 2020 led us to all three of these property markets splitting off in their own direction and functioning in very different ways. As we saw rents plummet this year due to renters unable to work during the pandemic and the end of AirBnb tourism outside of the country, condo inventory on the market began to pile up, particularly in the denser downtown areas. 20% down in rent in some areas. Though the rental market has been, and to date still is, the hardest hit sector of the residential real estate, condos sales were also down too. Not as much as some people think, but down. The larger the condo building downtown, the more likely the prices would have suffered. But with condos, it’s very different depending on what type of condo you have and where you are located. Some condos outside of the city or in lower density areas are still doing well, rising in price year over year. Condo townhomes were up in price. But it’s the condo apartment in the large condo building that often slipped in price. With houses, it was another story with competition and significant increases in prices. There was a pause from April to June with the early, uncertain times of the pandemic for houses, but by June price were marching right back up, and are still moving in that direction.
SPACE, THE 2020 FRONTIER
In the past, the Toronto market has pushed people to live in smaller and smaller spaces due to the expense of living in this city. Microcondos became much more in-demand because they were the affordable way to stay in the city. 2020 put a stop to all of that. In 2020, space became a bigger deal than anyone could have imagined. Individuals or couples or families all learned very quickly that their home needed to be more than just a place to live. It became a work place, a school, the place where some of us spend almost our entire day during lockdown. It didn’t take long for people to realize they needed more space. Some Torontonians left the city for the booming real estate market outside of the city in places like Waterloo and Hamilton and even as far as cottage country. Some also looked to buy houses in Toronto to acquire that space. It was a 2020 shift away from smaller spaces because where we live became so much more than just a place to sleep. It became everything for some of us.
THE REMOTE WORK REVOLUTION
The fact that we desired more space was spurred on by something many of us have been experiencing: remote work. This pandemic accelerated anyone’s plans to leave the city or seek more space in the city. And most importantly, it accelerated the remote working revolution. I personally don’t believe remote work is going to function for most companies in terms of those that wish to develop team spirit. For now, though, it’s all the rage, and there’s no denying that it’s here to stay in some hybrid form. Now companies can spend a lot less money on office space. Remote work and the desire for more space at home go hand in hand. For those who had to live in a city to be near work, they can now live where they want in or out of the city.
SELLING SEASONS REARRANGED
In a traditional year, the real estate market of Toronto has a predictable trajectory. It’s true that you can buy and sell real estate all year, and the market never really stops, but there are more busy and less busy times of the year. Winter usually starts off a little slow in January and then starts to build momentum with more properties for sales as we approach the Spring. The Spring market usually start to take flight late February or early March, peaks April and May then quiets down for the summer. August is often slower. Then right after Labour Day, bang! The Fall market starts suddenly then cools down a little in November and then December is the quietest month of the year when everyone is out doing Holiday things and prepping for the Holidays. Real estate is not top of mind.
2020 was not traditional. It started off very similar to any other year. March started off strong then sales numbers fell off a cliff. Then we hit April, usually the busiest month of the year. In 2020, it was the quietest month of the year with the fewest transaction of any month. Our first lockdown filled us with much uncertainty in the market. In the Spring, employment was unsteady and mortgages could be deferred. The result was a near freeze in the Toronto real estate market. May, also traditionally a robust month, was also shockingly low on transactions. Open houses were still banned. In April and May, it was even suggested that you only sell or buy real estate if it’s necessary. In other words, if you NEED to buy or sell. June, the time of year that generally starts to slow down, did the opposite. As the case numbers went down in June for Toronto, people were eager to start to return to normal life. Then something strange happened. The Spring market that never happened, was pushed two months ahead to happen in the summer. The summer, which is usually slow, had more sales than the Spring. Likely a first in the history of this city. Fall rolled out like other Falls, though the rise in Covid cases during the second wave in Toronto didn’t seem to deter the market quite as much as in the Spring. December is quiet again in terms of transactions, but I am still seeing that clients are more interested than usual in both buying and selling real estate in December 2020. Why? Well, we’re in lockdown again, and no one has any parties to attend. Most Holiday shopping was likely done online, and Holiday visits are discouraged. So, that leads to more time on your computer looking at real estate sites and wondering about the future.
Last year, I did say that interest rates would stay low, but I did not expect them to go even lower than they were at the top of the year. Interest rates are lower than I would have ever imagined, and that certainly is a big reason that buyers were keen to be in the market this year. These lower interest rates were designed to keep the economy moving through a tough year of job loss and business closures.
NO CRASH AND BURN
Covid did not crash Toronto’s real estate market. I will fully acknowledge that landlords of condos in this city, particularly in the bigger condo buildings have had a rough year, and that renting an apartment in these buildings is currently no easy task. Still, the Toronto real estate market was very healthy when this pandemic hit. There was very little inventory for condos or houses to buy. We have seen some building of inventory in the Toronto condo market, but not enough to lead to panic selling. Most investors and owners alike are not rushing to sell their properties. This may have been helped out by the deferred mortgages, but in 2020, we did not see a tidal wave of condo listings hit the market. Yes, prices were down in some buildings, but the losses are not staggering. And with a vaccine on the way, it is likely that the things that are hurting the condo market – no renters, no tourism, and everyone having to stay home – will not be a problem at some point in 2021.
Strangely, and I mean very strangely, houses in Toronto may have increased in price more than they would have if there was no pandemic. With the desire for more space, much time to think about the future, low interest rates and remote working, the desire for houses was fairly strong in Toronto – and outside of Toronto too.
But enough about 2020… Coming soon, I will have my attempted predictions for 2021. I may need to polish off the crystal ball a little better than last year. Hopefully, I will be a little more on target this time!
And if you are curious, here are my top 3 viewed blogs of 2020 based on my website metrics. Click to view.