Low Interest Rates
Mortgage rates across the country are experiencing an all-time low. HSBC has lowered its five-year fixed mortgage rate to 1.99% cracking the 2% barrier in Canada making history. These low rates could mean huge savings depending on your situation. The Canadian economy is beginning to recover amid the easing of coronavirus restrictions, and it is projected that economic activity will bounce back faster than expected in the third quarter. The Bank of Canada signalled that it would keep rates at a historic low to support the economic recovery which is a good sign for those who are looking to buy a home, refinance or consolidate debt.
Relief in the Rental Market
In April, short-term rentals were banned for the duration of the pandemic. This forced landlords to list their short-term rental properties (such as Airbnb’s) as long-term, and as a result inventory grew as prices dropped. Students have also fled outside of the city over the last couple months because employment rates have dropped any many cannot afford to live in the city without a steady income. On September 17, 2020 it was announced that rental prices will not increase from January 2021 to December 2021 to help unemployed tenants to pay their rent. It is too early to predict if rental pricing will remain low but if you are looking to rent in the city, now is the time.
Record Breaking Summer Sales
When the market was put on hold because of the coronavirus, buyers were sitting on the sidelines resulting in a surge in summer sales when the restrictions began to ease. The pandemic has moved the busy spring Real Estate season through the summer as GTA home prices broke records in both July and August. The market saw a surge of condo listings, and buyers competing for detached and semi-detached houses. Lisa Patel, Toronto Regional Real Estate Board (TRREB) President states that “Increased demand for ownership housing has been based on improving economic conditions, in terms of monthly GDP growth and job creation, and the continuation of very low borrowing costs. In addition, fewer households have chosen to go on vacation as a result of COVID-19 and instead have remained in the GTA and been active in the housing market, satisfying pent-up demand from the spring,”.
Detached Market Tightening vs. Condo Market Softening
Detached and semi-detached homes have been selling like hotcakes because people are becoming more comfortable working from home and are looking to purchase outside the city. July and August saw the highest recorded numbers for pricing in these segments as well as low inventory resulting in tight competition. On the other hand, condominium apartment listings well-outstripped condo sales growth and condo market conditions were comparatively more balanced, which was reflected in a slower pace of price growth in that segment. With that being said, we did not see price drops in the condo segment as selling prices in Toronto grew by 17 per cent and listings are up 25 per cent compared to last summer. This is beneficial for the economy but tough for new buyers.
According to economist Rishi Sondhi, Canada’s population is seeing its slowest growth since 2015 due to the COVID-19 pandemic. Supply and demand have become out of balance because of the border restrictions and some housing markets in Canada such as Ottawa and Montreal have taken a hit because of this. Despite the decline of immigration, Toronto’s market remains steady and resilient because of the enormous amount of competition compared to the limited amount of supply.
Increased Selling Prices
There has been a surge in selling prices in the midst of unemployment and a record wave of bankruptcies. At the beginning of the pandemic there was speculation that house prices would fall but this is not the case in a hot Real Estate market like Toronto. Low interest rates and pent up activity from home buyers and sellers is likely the reason for continued competition. CMCH has tightened its borrowing criteria but this has not stopped the market from booming. Another reason for the piqued interest in new housing may be self-isolation and the realization that the space people were residing in was not big enough. It is also common that sellers drop the price of a house when it is not selling but that has not been the case as sellers have proven to be holding on until they get a bite.
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