When discussing the impact of COVID-19 on the real estate market in the Greater Toronto Area, we need to distinguish between the pandemic’s effects on both condo and detached markets; as well as the impact on real estate in downtown Toronto vs the suburbs.

Here are some of the ways COVID-19 will impact Toronto’s real estate market in the long run:

1. Market liquidity: To bailout the economy from the pandemic’s effects, the Government of Canada released a COVID-19 Economy Response Plan to the tune of $82 billion, as support for individuals, businesses and organizations. As more capital is being injected into the economy, there might be possible inflation in the future. Although economists are unable to fully predict the impact of this influx of funds into the economy, one thing is sure: the capital will go into one of three options: the stock market, the real estate market or general spending. With reduced spending necessitated by the pandemic, it is likely that more people will rather invest in real estate or the stock market. However, considering the volatility associated with the stock market, many may prefer investing in real estate over stocks. This may  result in a positive impact on the real estate market. Beside this, the low mortgage rates in Canada may motivate many potential buyers to jump into the real estate market.
2. Job Market: In most countries, it is mostly blue-collar jobs that have been affected by the pandemic, but the wave is beginning to affect white-collar jobs as well. Although the Government has responded with significant bailout plans for individuals, by the time this bailout is withdrawn, there will be a significantly negative impact on the economy, leading to a worsening mortgage affordability for many buyers that will have an adverse impact on the expensive real estate market in Toronto.
3. The Suburbs are becoming Attractive: With physical distancing measures firmly in place, crowded areas are being increasingly avoided. Since less people are commuting to work (and instead, working from home), the number of people in downtown areas have reduced. The suburbs are becoming attractive since they are far from work centres, and this could become the new hot real estate market! The Greater Toronto Area used to be attractive because of its proximity to work centres, and so this will have an adverse impact on the real estate market in Toronto. To buttress this point, many people are considering investing in Ontario suburban markets quite far from Toronto- such as Guelph, Kitchener, Hamilton and even cottage county of Muskoka.

The Pandemic’s Effects on Condo vs Detached Markets

Prior to the COVID-19 crisis, the Toronto real estate market was the hottest real estate market in Canada, with a benchmark price of $846,000. Also, by the last quarter of 2019, Toronto’s real estate market had an average condo listing price of over $600,000, showing a 10.4% year-over-year price increase from 2018.

As the economy began to reopen in June, the Home Price Index (HPI) benchmark was noted to have an 8.2% year-over-year increase, and the average Toronto home selling price was $930,869. Detached and semi-detached houses have shown the most price growth, at 11% and 12% increase respectively.

The reduced attractiveness of condo markets can be accounted for by the need for physical/social distancing measures. Less people are inclined to buy houses with shared amenities e.g. elevators, swimming pools, park areas etc; and are instead choosing detached homes where only their families have access to these amenities.

In summary, the Toronto condo market is likely to suffer more due to the above listed factors i.e. less jobs, and work centres being less attractive. Detached markets are likely to stay healthy, as noted by the growth of this market in June.

Conclusion

• Toronto’s real estate market used to be the hottest in Canada, but COVID-19 has caused significant changes in how this market has fared.
• The three major ways COVID-19 will affect Toronto’s real estate market will be through: increased market liquidity, a worsening job market, and an increased attractiveness of suburban markets.
• While market liquidity will likely increase the amount of cash spent on real estate, a worsening job market and increased attractiveness of the suburbs (when compared to downtown Toronto) will lead to a plummeting market for Toronto’s real estate.
• While the condo market is likely to suffer more, the market for detached and semi-detached homes remains competitive and has experienced growth.

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.