What Will 2021 Bring For Toronto Real Estate?
There are a few burning questions I have about Toronto real estate in 2021.
Well here we go! 2021 is underway and I for one could not be more excited. Yes, we're still in lockdown, yes vaccines look like they are still many months away from reaching most people, yes it's cold, and yes I'm going a little stir crazy being at home at all hours of the day. But I'm choosing to stay positive. Vaccines are getting out there, the days are getting longer, and I'm choosing to look forward to more "normal" times rather letting this weird world we are in right now crush my spirit. Silver linings are out there, even if they're sometimes hard to see.
So what's going to happen in 2021 with Toronto real estate? Well, if you know me at all you know I never make market predictions (read here for one of my posts about how useless it is to try to predict a market) but there are some burning questions and things I'm keeping a close eye on as 2021 gets rolling. Here we go!
1 - Will freeholds keep setting new records? This is probably what most people are watching right now, and if you're in the market for a freehold house basically anywhere in the GTA and well beyond, be ready for a battle. Inventory in Toronto is anemically low. And yes, I know it's only the second week of January and nobody expects January to be all that busy anyway, but the fact that so many people are complaining about the lack of inventory means that people are out there looking as we speak. And I can almost guarantee that just about every house on the market over the next several weeks will get several offers. So get ready for those bidding wars because they're not going anywhere anytime soon. So will GTA freehold prices set more records into 2021? That might be a foregone conclusion.
2 - What will happen to downtown condos? That's the million dollar question. If you read my last monthly update back in December, you might recall how obsessive I was towards the end of the year watching condo inventory in the core drop wayyyy down from where it peaked back in October 2020. From close to 3500 units on the market in October down to just 1385 units as of Jan 1st. That's a huge drop. And while inventory levels alone don't necessarily mean prices will rise, it's a darn good starting point. Inventory will certainly rise as it always does after the holidays but the buyer optimism and activity I saw last month in the condo market was a bit of a surprise to a lot of agents. I don't think anybody saw it coming. Units were getting snapped up and it almost felt like buyers were saying "we're close to a bottom, I don't want to wait until the bottom has passed. I'm willing to jump in now". I'm very curious to see if this momentum continues into the Spring... if it does, then we may have already seen the bottom in the condo market. And you know what they say about bottoms - by the time you spot it, it's already passed.
3 - What will happen to the downtown rental market? Man, this is tough. There is no logical reason why the rental market should get any better for the next several months. Downtown offices are still closed and immigration is all but shut down - and unless/until these things change, what catalyst is there really for rental demand to increase? The numbers may fool you -rental activity is very strong and has been for the past couple months and there are a lot of rental deals being done. But there are very few "net new" renters entering the market. It's mostly just people in the city moving from one building or unit to another, usually because people are getting better deals. And all the while, new condos are being completed every couple months adding to the supply. The silver lining here is that I'm getting more and more calls from renters saying "yes, the city is still basically shut down and I won't have to physically go to work anytime soon, but I'd rather lock in a good deal on rent now before everyone comes flooding back and rents go up again". So maybe there's a glimmer of hope for the rental market on the horizon as some places get too cheap to pass up.
4 - Will the government make any changes to help first time buyers? They've already started making some changes by adjusting the laughable and severely underused First-Time Home Buyer Incentive program where a buyer actually allows the government to own 5% of their property in exchange for a slightly lower monthly mortgage payment. I don't know a single person who has used this program but it has been adjusted to allow for more access to more people. I'm not going to get into the details here because I strongly believe this should be an absolute last resort for someone who might be desperate to get into the market and has no other option or access to capital and saving the extra couple hundred dollars a month is worth giving up 5% of your biggest asset to the government, but at least Trudeau and his team are acknowledging that the entry point to housing in Canada (ie, condos) needs to be supported for the entire ecosystem of real estate (and ultimately the economy) to thrive. Maybe we'll see that stress test finally get a major overhaul? Not sure if I want to hold my breath on that one.
5 - Will interest rates really stay this low? This is something that every economist is probably wondering as well. The Bank of Canada has done an amazing job of being transparent about its policies, all but guaranteeing that the overnight rate will not rise before 2023. And we could all use some predictability these days, right? But what the Bank of Canada can't do is control bond rates, which determine what happens to fixed rate mortgages. Can we expect to see sub 2% 5-year fixed rates until 2023? Or will fixed rates rise while variable rates stay insanely low? It seems that just when everyone says rates can't possibly go any lower, they do. Remember when 5 year fixed rates first dropped to 2.99% a few years ago and people's jaws dropped? Feels like a lifetime ago and yet here we are with HSBC now offering 0.99% variable rates today. Crazy times.
So that's what I'll be watching for 2021, at least for the first several months. Who knows what crazy things we'll see this year as vaccine rollouts continue, the economy starts to reopen, immigration gets going, universities welcome students back, and I finally start shaking people's hands again. There's still a lot of unknowns and a lot more waiting in the near future for sure, but as long as that light at the end of the tunnel keeps getting brighter, I hope we can all stay positive, stay kind, and look to brighter days ahead.
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Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)