Will second wave of COVID burst Toronto real estate bubble?
Since March, there was first the market freeze-up in the immediate aftermath of the lockdown. In a matter of weeks, however, the buyers were back, thanks in large part to the real estate industry pivoting to more robust virtual marketing while implementing safety protocols to ensure showings could be conducted safely and responsibly. As spring progressed into summer, the sales figures continued to boggle the mind. Houses were selling with multiple offers for record prices in record time; demand seemingly insatiable. Months cooped up inside had left many with time to reassess their set up. For some buyers that meant a desire for more space to accommodate the new rhythms of working, schooling and cooking every meal from home, while for others it was a move out of the city. Outer markets were on fire.
Buyers and sellers alike seemed to share the belief that in the face of an all but guaranteed second wave, the time was now. All the while, the condo market was showing signs of distress. In response to widespread job losses, particularly in the hospitality and service sector, university classes moving online, and the short-term rental market being decimated by the abrupt loss of tourism, the rental market was flooded with vacant downtown condos.
It wouldn’t be long, analysts predicted, until investors, faced with uncertain returns, started dumping their units.
By the time September rolled around and the original mortgage deferral programs ended, the condo market surged with new listings — a 215% increase over the same month last year. For the first time in a very long time, the term “buyer’s market” was being used to describe what was happening with downtown condos, particularly the smaller, more entry-level units that used to be the only way some buyers could afford to get onto the ladder.
One might assume that this means the bubble has burst and the great correction is upon us, but the numbers don’t yet support that. Condo prices are still up 7.7% over last year. Even in the wake of the economic destruction brought on by a global pandemic, condos continue to sell, albeit at a slower pace than we’re used to. There will be a dip, no doubt, but that surge of inventory is starting to absorb and we’re not seeing many fire sales.
On the freehold front, even that is starting to slow down. Houses are selling for top dollar, yes, but for the most part, the crazed bidding wars seem to have abated. Pricing matters now — houses that are properly priced sell quickly, but sellers who have unrealistic expectations are just as likely to see their properties sit. Anecdotally, it seems like things are slowing down. A number of the city’s top agents are now advising their clients to hold off on listing their properties until the new year.
Now that the weather is starting to turn, summer’s respite from the realities of life in a pandemic is quickly slipping away. Whereas before we could hold on to the illusion of normalcy through socially distanced barbeques and dock days at the cottage, it’s going to be hard to escape how strange life has become when having to bundle up in snowsuits to spend backyard time with loved ones. It leaves many of us anxiously wondering what is to come in the months ahead.
Will the second wave be as bad as some fear? Will there be another seize up or will the market just need another acclimation period? Will the rebound be as fast and fierce next time around? So many questions. And while the Toronto real estate market is a beast who has proven its resiliency over and over again, only time will tell. Stay tuned.