Toronto market adjusts to post-Labour Day shake-up

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The real estate market in and around the Toronto area appears to be retaining heat in some segments and cooling slightly in others as buyers and sellers grapple with the decisions surrounding sending children back to school during a pandemic.

Agents who work in the family-oriented neighbourhoods of uptown Toronto, for example, were already seeing a less hectic pace in the last week of August as the return to the classroom approached. Condo owners downtown, meanwhile, were watching the start of the school term for a different reason: The Coronavirus pandemic that closed borders and put classes online has also meant that many foreign postsecondary students have not returned.

For people without school-aged children – particularly first-time buyers and emptynesters – real estate transactions are carrying on at a fast clip.

In downtown Toronto, agents are reporting that rents for condo units have fallen by 10 per cent or 15 per cent in recent months. In the Bay Street corridor popular with University of Toronto students, listings are swelling as units sit empty.

At the same time, rules banning short-term rentals have become more stringent and some buildings are banning them all together.

The inventory of properties for sale is rising and, as the owners of vacant units lose out on rent, more of them are likely to become sellers, agents say. Buyers, meanwhile, figure they may get better deals if they hold off for a while.

Richard Fournier, a real estate agent with Re/Max Hallmark Chay Realty Inc. in Barrie, Ont., is still seeing a stream of people interested in migrating north to the city of just more than 150,000 people.

“I have daily Zoom calls with buyers that want to leave downtown Toronto and are moving up here,” Mr. Fournier says.

Mr. Fournier has noticed that some patches of the Greater Golden Horseshoe are a bit more tepid now. West of Toronto in Burlington, for example, sales of properties with asking prices above $1.5-million have slowed significantly in the past two or three weeks, he says.

Price cuts are becoming common and some listings in upscale areas are being cancelled and then relisted.

“Anything under $1.1-million is still moving quickly,” he says.

In Barrie, inventory at the start of September was low, Mr. Fournier because parents have been preparing for a school year that looks dramatically different because of the pandemic. That uncertainty prompted some parents to list in the summer, while others may be delaying their decision.

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“Is that just school or is that a substantial shift in the market?,” he asks, stressing that agents don’t have the answer yet. “There is still some fear out there in terms of COVID.”

Buyers are competing for townhouses in the $450,000 to $650,000 range. Houses in the $700,000 to $800,000 range are also popular, he says. Mr. Fournier sees a mix of buyers from the city, including downsizers and lots of young parents with one child and plans for more.

In some cases, though, potential buyers aren’t happy with the property that $750,000 or so buys in Barrie after several years of escalating prices. Some of those people are going farther afield to smaller towns in the townships of Tiny and Springwater, where they can find a bungalow with one-half acre of lawn.

In the suburban 905 area code of the Greater Toronto Area, Cameron Forbes, general manager of Re/Max Realtron Realty Inc., is still seeing strength – and he’s not predicting a slowdown any time soon.

In August, the price of a detached home in the suburbs jumped 18.5 per cent from August, 2019. That outpaced the gain of 13.7 per cent for semi-detached houses, 16 per cent for townhouses and 12.9 per cent for condo apartments in the same period.

Mortgage rates at record lows and the pent-up demand left over from the spring hiatus will continue to drive sales, he believes. Mr. Forbes points out that job transfers, divorces and other life changes lead people to buy and sell real estate – even if they hit pause for a time.

“At the end of the day, people require a home,” Mr. Forbes said.

As for the reasons homeowners are listing their large house in the suburbs for sale, Mr. Forbes says they are often emptynesters who are downsizing and moving to a downtown condo unit, or people moving farther out of town to the Kawartha Lakes and other parts of cottage country.

During the pandemic, some of those potential sellers have put their move to a downtown condo on hold, he says, because they are uneasy about common spaces.

“The biggest challenge they have is waiting for an elevator,” he says.

As a result, inventory could be tight in the fall. Some sellers also moved up their plans and sold in the summer, he adds.

“The challenge will be to have enough listings.”

Looking at the risks to his forecast, Mr. Forbes points out that immigration to Canada is mainly halted right now, but he expects levels to rebound.

Mr. Forbes believes economic uncertainty won’t weigh heavily on the market over the next 12 to 18 months, but he adds the caveat that a second wave of COVID-19 cases could have an impact.

Many market watchers are keeping an eye on the big banks as they phase out the mortgage payment deferrals offered since the spring to see if some owners will decide to sell rather than continue to shoulder heavy mortgage debt in a period of high unemployment.

“Probably it will result in some more listings,” Mr. Forbes says. “Some people will have to right-size their home.”

Lenders will likely have to foreclose and force a sale in some instances, he says, but mostly they will try to avoid doing so.

“Banks want to keep the homeowner there.”

Ksenia Bushmeneva, economist at Toronto-Dominion Bank, sees optimistic signs in the way that Canadian households were able to rebuild their wealth in the second quarter.

“So far it appears that the consumer side of the economy has held up better than might have been expected at the start of the crisis,” she says in a report on household debt.

Ms. Bushmeneva says the high level of indebtedness in this country had the potential to greatly amplify the hit to the economy and slow the subsequent recovery.

The economist cautions that federal government income support programs and the payment deferrals offered by financial institutions have been paramount in averting a delinquency tsunami and protecting household finances. As these support measures wane, risks to household finances still lie ahead.

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