The beginning of 2020 showed a promising start for the Toronto real estate market with increased number of transactions and rising prices. Now that we are facing the global pandemic of COVID-19,  many of my clients are asking me how the real estate market will respond in the coming months. Although it is impossible to predict the future, there are some key points that will determine how the market will react.

LOWER MORTGAGE RATES

In order to help Canadians financially through these stressful times, the Bank of Canada announced an emergency rate cut by 50 points to 0.75% in response to the global threat to the virus. Canadians who currently have a variable rate mortgage will benefit the most from this decrease as their rate has now dropped by one percent in less than two weeks. This will help to keep Canadians in their homes as payments might be more challenging. Anyone with an existing fixed mortgage rate might consider paying the penalty to break their mortgage and refinance to a lower rate. It is possible to see new demand from new homebuyers as the overall mortgage rates have decrease by 1.6% increasing their affordability to purchase a new property.

STRENGTH OF CANADA’S ECONOMY

Canada’s COVID-19 Economic Response Plan promises to provide more that $80 Billion to directly support Canadian workers and businesses that are effected from the shutdown of the virus. This however will put strain on the Canadian economy and many businesses will not survive the shutdown and unfortunately jobs will be lost. In addition, we are also seeing record lows in the price of oil which will have a big impact on the overall economy and the energy sector that our country heavily relies on. If the economy weakens significantly, real estate prices will drop in response.

REAL ESTATE SEEN AS A SAFE HAVEN FOR INVESTORS

The Coronavirus along with the economic fallout that follows have pushed the stock market lower. As stock investors see violent fluctuations and drops in their portfolios, real estate is seen as a hard asset and is more stable in times of uncertainty. Real estate investors also tend to have a greater timelines and see growth over the long run. This may bring more investors to the market and definitely keep current landlords in the real estate market. As usual, demand and location will be an important factor and downtown Toronto and Toronto Condos will always be a popular choice.

CHANGES IN DEMAND

One other factor that we have yet to experience is how businesses will change after the pandemic is over. Many large scale companies have been able to adapt to a work from home platform in order to still operate. It will be interesting how many companies will continue this platform and save or cut down on the cost of office space. Being able to work remotely, might have an effect on the overall demand for housing in urban areas.

Directly looking at the demand for residential properties, real estate transactions have slowed significantly as realtors face challenges in showing listings to potential buyers. Meeting these challenges head on, I have recently sold a few properties during the lockdown via virtual tours and FaceTime to buyers who needed a place to live in downtown Toronto. It is quite possible that we may see an increase in future sales from pent up demand of buyers waiting the virus out.

AFFORDABILITY ISSUES

Lastly, affordability will probably have the biggest impact on the real estate market. With record numbers of Canadians filing for unemployment and struggling to make payments, many people will be forced to go through their savings in order to manage through these tough times. It is possible for us to see a decrease in first time homebuyers for some time to follow as it may unfortunately delay homeownership. Demand for smaller Toronto condos should be sustained due to affordability and act as an entry point into the market.

SUMMARY

As you can see there are many factors both positive and negative that can sway which direction the real estate market will go. As an expert who has been selling Toronto Condos and Toronto Real Estate for almost 20 years, I have seen many shifts and pauses in the market. I am a firm believer and investor in real estate and know that real estate will be profitable in the long run. As Canadians, we continue to show are strength as a community and take on the battle to fight COVID-19 together and I am confident brighter days are ahead.

I am always here to answer any questions you may have regarding Toronto Condos or Toronto Real Estate. CONTACT REZA. 416-888-7367