The novel coronavirus pandemic that caused upheaval in the work and home lives of Canadians in 2020 will continue to shape the real estate landscape in Toronto and many parts of Ontario in 2021, says John Andrew, a professor at Queen’s University in Kingston.
Prof. Andrew, director of the Queen’s Real Estate Roundtable, believes that a profound shift has taken place as people change their perceptions of what they’re willing to accept once they know about a pandemic.
“I think work patterns are the big story here,” Prof. Andrew says.
He expects the “work from home” trend to become entrenched not because of employee preferences, but because employers are realizing how much money they will be able to save by downsizing their workplace real estate.
Many employees will likely continue to work from home most days and only go into the office once or twice a week, if at all, he says. If that’s the case, employers may do away with a cubicle for each employee and just provide generic workstations that people share.
“I think that is really going to have profound implications for peoples’ choices in where they live.”
In the past, people who worked downtown were willing to live in small spaces in order to avoid a long commute and because they spent a lot of time at the office during the day and dining out at restaurants in the evening, he says.
When the COVID-19 health crisis prompted the Ontario government to impose restrictions on travel and business in March, immigration halted, Airbnb rentals dried up, and young people fled the core to live with their parents in the suburbs.
The combination created a perfect storm that hammered the market for downtown condo apartments, he says.
“The smaller the condo unit, the worse it was going to perform.”
Even those living in larger units began to contemplate life in smaller cities such as Barrie and Guelph, or suburbs such as Pickering and Ajax. Others chose the bucolic landscape of Prince Edward County.
Prof. Andrew believes a large number of city dwellers who rode and subways and GO trains in the past are now afraid of public transit. He expects that heightened anxiety to linger, even when the current pandemic ends.
Prof. Andrew believes many people have come to believe that high density is not a healthy way to live.
“Peoples’ awareness of the spread of disease has changed,” he says. “This may not be a one-off. It has changed peoples’ perceptions of where and how they’re going to live.”
And when he looks at the future of building from his perspective as a professor in Queen’s School of Urban and Regional Planning, he sees a dramatic shift.
Instilled in urban planners is a hatred of sprawl and a love of density, he says. Urban planners also laud public transit and disdain the private automobile.
He believes lots of commuters will now be more willing to endure traffic congestion and the high cost of owning a vehicle because it makes them feel safe.
“They’re going to make that trade-off in commuting, and they’re going to want to do it in their own cars.”
All of this will have long-term implications for the downtown condo market, in his opinion.
Some of the short-term rental market may rebound because out-of-town employees may be willing to rent a unit for the one or two nights they are in the city, he says. But the cohort of people looking to live in condos long-term will probably be diminished for some time to come.
“I think that demand is probably not going to recover.”
For many people, the scariest aspect of living in a high-rise is the ride in a crowded elevator, he says.
“That became a very real fear and it still is a fear for most people,” he says.
Prof. Andrew estimates condo prices have dipped about 10 per cent in downtown Toronto. While a certain number of people – especially investors – have been waiting on the sidelines for a correction, he does not expect they will provide enough demand to buoy the market.
“I think we’re going to see a continued decline in condo prices.”
Prof. Andrew has long feared that a downturn in the condo market could lead to panic selling by some investors.
In many cases, the rent they collect barely covers the mortgage payment.
“If they’re not able to rent for a few months, they can quickly get into trouble,” he says.
Meanwhile, the professor expects the single-family home market to remain strong. People will be willing to spend money on real estate and on renovating their new spaces, he predicts.
The Bank of Canada has signalled that it intends to keep interest rates low for the next couple of years.
Still, Prof. Andrew sees some risk to that segment as well. The supply of new listings could increase significantly if homeowners are struggling financially as government stimulus programs wind down and businesses are hurt by the second lockdown.
Prof. Andrew expects many home and business owners will find a way to hang on through the tough winter months – even if they have to take on more debt to do so. The arrival of vaccines bodes well for economic recovery by next summer, he says.
But another significant risk to real estate awaits if that timetable doesn’t pan out.
“If that turns out not to be the case, we could be in deep trouble.”
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