While the economy has been hit hard by the COVID-19 pandemic, realtors have been seeing activity return and say the real estate market might rebound much faster than anticipated
The real estate market in the Greater Toronto Area was red-hot at the start of the year, with a low interest rate environment and strong employment growth.
Then, of course, COVID-19 came along and shattered those prospects.
With mandated business closures and a loss of consumer confidence, The Conference Board of Canada expects to see an 8.2 per cent contraction of the Canadian economy this year – the worst annual contraction on record – according to its Canadian Outlook Summary: Summer 2020.
The think tank also forecasts a decline of 11 per cent in the average home price between the first and third quarters of this year.
But it’s not all bad news: The Conference Board expects the economy will rebound by 6.7 per cent in 2021 and 4.8 per cent in 2022, depending on how well the post-COVID recovery is managed and if there’s a second wave severe enough to shut down the economy again.
“There are a lot of unknowns floating around out there,” says Robin Wiebe, the board’s chief economist. “The question is how is employment going to recover, because employment is critical to the housing market.”
Another factor is the desirability of living downtown, after this period of residents being cooped up in condos with lack of green space. It’s the “topic du jour,” Wiebe says, because several companies have decided to permanently scrap the office, so employees might now consider moving to a larger property outside of the GTA.
But Toronto has experienced rapid population growth in recent years, so there’s also pent-up demand.
“Once COVID-19 is past and hopefully most people are back to work, the underlying demographics are favourable,” Wiebe says. “Toronto is not overbuilt by any stretch.”
This is also what realtors are seeing on the ground. “We’ve already seen a dramatic uptick in national activity in May and June, and we expect this trend to continue through the summer,” says Christopher Alexander, executive vice-president and regional director with RE/MAX of Ontario-Atlantic Canada.
“We credit this to the pre-existing pent-up demand for homes in hot markets such as Vancouver, Toronto and Ottawa, which helped mitigate the decline in transactions that were paused due to the pandemic.”
The Canadian market saw a steep year-over-year decline in the volume of transactions during the peak of COVID-19, according to data from RE/MAX Canada.
However, exceptionally low inventory in much of Canada has been a key factor in price stability throughout the pandemic, Alexander says, and will likely result in continued upward price pressure as restrictions ease and demand increases further.
“We’re already seeing a return to pre-pandemic activity – and then some – with multiple-offer scenarios in markets like Toronto, Ottawa and Vancouver. This indicates to us that markets could improve much faster than we initially anticipated at the beginning of COVID-19,” Alexander says.
According to a Leger survey conducted on behalf of RE/MAX Canada, 56 per cent of Canadians planning to engage in the real estate market expect to do so in less than a year.
While sales volumes have declined, prices have held, says Jared Menkes, executive vice-president of high-rise residential with Menkes Developments. “We are seeing signs of pent-up demand and positive sentiments among buyers, with the number of inquiries and people resuming their housing research growing every week.”
Although COVID-19 has put a pause on peoples’ lives, “their changing housing needs don’t just go away,” Menkes says.
“People are still getting engaged, having babies or wanting to move out from their family homes. If anything, being at home during COVID has caused many households to re-evaluate their space needs and made them realize that they do need to upsize or upgrade their existing home.”
Indeed, more people are looking for “vacation-like properties,” he says, and there has been a surge in demand for homes that have active areas and green spaces. That has been a key focus for Menkes for some time now – certainly before the pandemic.
“Sugar Wharf is a perfect example of a project that was developed with a resort-like theme, aimed at offering future residents a wide range of outdoor amenities, plus the development includes a new two-acre community park,” Menkes says.
The developer has continued this focus with its Mobilio project located in Vaughan. Aside from the outdoor spaces it’s creating within the development, the site will also be anchored by a linear park, part of Vaughan’s Black Creek renewal project. Once completed, it will establish a series of promenades and parks that span more than 30 acres.
“While we aim to incorporate these aspects into the development and design of our projects, we also look at what the surrounding area will offer,” Menkes says. For example, with a project like Sugar Wharf, residents will also have easy access to the Toronto waterfront and islands.
Shane Baghai, president of Baghai Developments, is also seeing the market start to pick up, after delays related to shipping and new construction protocols.
“COVID really did a number on builders,” he says. “Now things are starting to move and I see vibrancy in the city.”
Indeed, as far as the market is concerned, “it’s almost as buoyant and active as before, in some cases even more so.”
With first-time buyers, “condo sales have probably dropped marginally,” Baghai says, but there’s demand for two- and three-bedroom condos, particularly if those condo units have large balconies or terraces. Leaside Manor, for example, is well-suited to meet this demand with spacious two- and three-bedroom suites plus den.
“We’ve been pleasantly surprised – we’ve got a ton of interest,” says Bill Gairdner, founder and president of Gairloch Developments, which launched its eight-storey development at 1414 Bayview at the start of June. “We’re at 35 per cent sold, so that was really positive considering there was no launch event or flashy festivities.”
Launching in June was “somewhat of a risky move,” Gairdner says. “The vast majority of developers I know have all deferred to the fall with the idea that the fall will be a new world order.”
But he says there’s not a lot of product like 1414 Bayview in the Leaside neighbourhood, “so there’s pent-up demand,” he says.
“So it’s not reflective of the whole market. I don’t think it’s indicative of how condos are doing industry-wide. Our business model is well aligned with COVID or post-COVID.”
The condominium has only 44 units, many with generous private terraces and fewer communal spaces or shared amenities that tenants may be reluctant to use, especially if there’s a second wave of COVID-19 in the fall. At the same time, buyers want to make sure they have access to outdoor spaces.
“The neighbourhood itself is the amenity: the Don Valley trails, the Mount Pleasant Cemetery, the retail strip up and down Bayview,” Gairdner says.
“None of our projects have been too focused on saunas or spas or pools. It’s all very understated, more boutique style.”
RE/MAX expects to see relative price stability by the end of 2020, with a possible price correction in the single digits.
“That said, due to the high degree of uncertainty around the pandemic and a possible second wave in the fall, it’s difficult to predict beyond 2020 at this time,” Alexander says.
“If the first wave of COVID-19 has taught us anything, it’s to expect the unexpected and be prepared to pivot.”
This content was produced by The Globe and Mail’s Globe Content Studio. The Globe’s editorial department was not involved in its creation.