The Red Hot GTA Housing Market
Wednesday Sep 16th, 2020
What’s Happening Now and A Look Ahead
In the midst of a global pandemic, the GTA housing market continues to astound and defy its critics. In the last several months, we’ve seen an incredible comeback; from a spring that could almost be described as frozen, to a red hot summer with incredible growth and activity.
Across the GTA in all home types, prices increased an average of 20% from Aug 2019 to Aug 2020. And total residential transactions (sales) were up 40% year over year! These are huge numbers, especially for a month that is typically slow. What is going on?
With the COVID phase 1 lock down effectively bringing life to a grinding to halt in the spring, the busiest season in real estate, many would-be home buyers got put on hold. As we moved into summer, the relaxing of restrictions allowed buyers and sellers to move forward with their plans. This pent-up demand, coupled with families cancelling vacation plans, and extremely low interest rates, greatly fuelled the traditionally slower summer market.
Another interesting trend we’ve seen is more homebuyers moving away from the City of Toronto. Many millennials and other move-up buyers are trading in their smaller spaces in the City for larger properties with big yards in suburbia and beyond. Some of the largest gains in sales and price have been outside Toronto. This shift seems to have been driven by home owners working from home and seeking out areas with more space and less crowded environments.
But, is all this sustainable? While most economists and experts do not predict a crash for the robust GTA housing market, there are many factors that could contribute to a downturn in 2021. The biggest concern is uncertainty. We have no end date for this pandemic and have no idea the severity and the economic fallout.
Add to this the many government programs that will be coming to an end in the fall. Notably, the mortgage deferral program. Some estimate that 1 in 6 homeowners have asked for some sort of deferral since the program went into place, and there are no good estimates for how many of those will be able to afford their current home without further assisstance. We may begin to see more homes brought to market, due to “pain-selling” or default.
Unemployment is, of course, another huge variable. While the number looks better then it did back in the spring, we are still sitting at 10%, and this number will continue to change as businesses feel the pain of the pandemic.
Immigration is a less talked about issue, but is really critical to the GTA housing market. We normally see about 100,000 immigrants move into the GTA and obviously with restrictions imposed at borders etc, this number will be considerably reduced this year and perhaps for the coming year. Newcomers to Canada are expected to purchase 1 in every 5 homes on the market!
Is it doom and gloom to come for the GTA? Unlikely. The GTA still has a diversified economy, strong financial core and is a sought after area for high quality of life. But, we should brace ourselves and expect that this red hot market may not last. Looking to get into the market or ready for a change? Reach out and let's schedule a time to talk.