November 24, 2020 | 2020 trends Toronto Real Estate
This year it may feel like the only thing that has influenced Toronto real estate has been Covid-19. And to a large extent, that’s true. But I’m here to tell you that’s not entirely true. There are some things that have affected the Toronto real estate market that were not brought on by the pandemic. The pandemic may have exacerbated some of these trends, but they were well under way before Covid was a word we all knew.
So, what has changed the course of Toronto real estate that is not Covid-related? Here are three:
AIRBNB RENTALS WOULD HAVE SUFFERED WITHOUT COVID
Even without Covid, Airbnb and other short-term rentals were certainly poised to see their share of the rental market drop. In fact, fewer short-term rentals would have pushed more Airbnb landlords into long term leases leading and subsequent lower rents in Toronto. All without Covid! Is that to say that Covid had no impact on the Toronto short term market? Of course not. It just made the suffering of Airbnb and short term rentals even worse. Under the new regulations brought out this year in Toronto, short-term rentals are restricted to principal residences in an attempt to crack down on so called “ghost hotels,” where residential properties are consistently rented out to visitors. Licensing of short-term rental companies and registration of operators began in the Fall of 2020. Under the new rules, people can rent up to three bedrooms in a unit for an unlimited number of nights per year (up to a maximum of 28 days per stay) or their entire home for a maximum of 180 nights per year, says the city website. That’s a big reduction in allowable short term renting. They will also need to pay 4% Municipal Accommodation Tax. So, we hear about the suffering of Toronto short-term rentals. And that suffering is real. Still, there would have been some suffering, maybe not quite as much, if there was no Covid.
TORONTO HOUSE PRICE GAINS WOULD HAVE OUTPACED CONDO PRICE GAINS WITHOUT COVID
This trend was set in motion even before Covid hit. For the past several years, condos have been outpacing house price increases. This had to do with the fact that many buyers were first-time buyers and condos were the place where they could afford to buy. But once condo prices became too high, it was no surprise that houses started to sell more often as the gap between the two housing types were closed. On another note, if we go back to the basics of supply and demand, houses have very limited supply in Toronto. There are very few new houses that are built. Condos, on the other hand, have much more supply coming in. So, it makes sense that we would return to a place where houses traditionally sell for more than condos. Of course, like my first point, Covid did exacerbate this problem. With the huge shift to remote working, there was even a stronger shift to houses because there is more space for all of the the people now working from home.
THE RISE OF LANEWAY HOUSES
This is early days, but the limited amount of space in the old city of Toronto, and the ease at which Toronto will now allow Torontonians to build laneway houses is making a boom in this industry, regardless of what Covid does. Before Covid, there was a demand to maximize the space available in Toronto. We had a housing shortage. And though there are some people leaving the city to buy homes in places like Kitchener, housing is still a very important to Toronto. Laneway houses proved a great place to add some of the needed housing whether the owner wants to rent it out or live in it. We are still in the early stages, but I am already seeing a boom in laneway house construction. And this is just the start. This year, for the first time, I have seen houses advertised with “laneway” potential. In other words, having the ability to have a laneway house now adds value to your home. Again, not Covid-related.
I’m not saying all of this to imply that Covid has not had a great influence this year on Toronto real estate. Covid has set into motion certain trends that there are no turning back from. Remote working, brought on by Covid, will have a huge impact on real estate in the years to come -particularly in the commercial office sector. Just how much, is yet to be seen. Still, this year has made it feel like Covid has changed everything. I’m here to say that it’s not true. Not everything. In fact, there are some trends that were already well under way, even before we knew we had a pandemic mess to work through.