It seemed like just a few months ago Toronto real estate was roaring, with year-over-year price increases and an active spring home-buying market. Yet, as the seasons change, the course of our lives follows suit due to the COVID-19 pandemic. From self-quarantining to social distancing measures, there is a lot of uncertainty at the moment.
Many popular summer events in the city have been cancelled, and experts predict that the coronavirus measures will last in Canada until at least July. This is expected until the number of cases is reduced and the pandemic is deemed “under control.”
If we look forward to the next few months, we can speculate about how the Toronto housing market will be affected and if real estate prices in this city will significantly drop come summertime.
Pumping the brakes on the market for now
Yet, we cannot be sure that this trend will continue into the summer and that prices will necessarily drop further. The Toronto Regional Real Estate Board (TRREB) notes that the pause on activity will lead to more demand once measures loosen. As a result of banned open houses, homebuyers have resorted to creative ways of viewing listings and engaging with the market, leveraging technology to facilitate the home-buying process while mitigating the impact of coronavirus on real estate activity in Toronto.
Social distancing will likely continue for at least a portion of the summer. Yet, we expect buyers who have been waiting patiently to continue their home search will quickly re-enter the market when we return to some normalcy. Meanwhile, some sellers will take a wait-and-see approach and may not need to reduce their home sale prices or make concessions.
Yet, when the market recovers, buyers are likely to find the same shortage of listings and inventory that existed before the coronavirus outbreak, further contributing to increased demand and high prices in the city.
Pace of the economy and employment
The state of the economy and unemployment rates will play a role in the amount of financial power people have to make a home purchase. The government has put a number of COVID-19 relief measures in place to help Canadians during this time. The extra financial assistance will certainly help Canadians, and it may even encourage real estate activity for those who need to buy or sell at this time.
The timing of the market recovery will affect any real estate price drops this summer. Those who are concerned about their employment in the coming months could pull demand down. However, those who have stable employment and cash that isn’t tied up in investments can take advantage of low interest rates. First-time homebuyers can leverage current market conditions, since they don’t have equity tied up in a previous home. First-time buyers who qualify can also use the First-Time Homebuyer Incentive to help with their purchase.
Since market activity has slowed, those who are willing to brave current market conditions and leverage technology can use the decrease in market competition to negotiate a better home sale price. Sellers who are keen on selling during this time, may be more flexible and open to negotiation.
Low interest rates attract buyers
The mortgage stress test has made purchasing a home challenging for some. First-time homebuyers have especially faced difficulty in qualifying for affordable mortgages.
However, the Bank of Canada has made changes to their benchmark rate and lowered the interest rate to 0.25% – the lowest it’s ever been. Before March, the rate was sitting at 1.75%. If buyers decide that they want to take advantage of lower rates, this could motivate them to purchase homes during this time.
This could be the break homebuyers need, widening their budget, housing options and features. For example, if they always wanted a home with four bedrooms or a larger backyard, lower interest rates may allow them to afford those additional features.
For many Canadians, there are decisions that need to be made about whether it’s the right time to purchase a home or not. If you’re in a position to leverage low interest rates and are willing to use technology, then you can get savings by making a purchase during this time. However, people should consider their safety first and depending on your current employment situation, it could make sense to wait.