It’s been a rough few months for many businesses, as cities shut down and people scrambled to figure out whether virtual work was possible, and what that would look like.
The real estate industry was no exception. The GTA spring market was poised to be the strongest one in two decades, but numbers dropped dramatically in mid-March. There is encouraging news, however, that housing market activity has headed on a steadily upward trajectory in the last few weeks.
TRREB’s monthly report shares economic indicators from Statistics Canada, and an overview of listing and sales activity in the GTA with year-over-year comparisons. It’s no surprise that the number of new listings and number of sales dropped precipitously in mid-March due to the COVID-19 state of emergency, and remained at record lows in April. The averages show a 67% decline in number of sales from April 2019, but a small increase (0.1%) in the average sale price. Averages don’t tell you everything, because of course some geographic areas were hit harder than others, and some housing types experienced a different impact in pricing. The year-over-year comparisons also do not take into account the significant gains in value we saw at the start of 2020 that were lost.
Supply and demand dictate real estate values, and there continues to be a shortage of available housing in the GTA. This is what is keeping property values relatively stable at this time of crisis. In March and April we had sellers holding off on listing their properties, and buyers holding off on looking for properties. As people begin to resume their plans, we see more listings coming on the market – but there are also more buyers now wanting to purchase those properties.
By the middle of May, we saw a dramatic increase in market activity on TRREB. More listings, more showings, more offers, more sales…and a return to competing multiple offer situations in many core areas of the city, as well as further afield. The numbers vary greatly depending on location, housing type, and supply of properties in the area, but from mid-April to mid-May, the upward trend suggests that a gradual recovery is already underway.
There are still several unknowns about the full impact of COVID-19, including how many jobs and businesses are permanently lost vs temporary layoffs. Benjamin Tal, Deputy Chief Economist for CIBC, reviewed data provided by Stats Canada, and pointed out that 35% of the jobs lost thus far were in the part-time sector, 47% in the full-time lower-salary sector, and 18% in the full-time higher-salary category. The latter is more likely to impact homeowners or potential homeowners, but all of these numbers will adjust as we see how many temporary layoffs are called back.
He went on to say that even though this is an unprecedented economic crisis, the government is also responding in unprecedented ways to support the economy. The Bank of Canada has lowered interest rates, and is committed to injecting enough liquidity into the market so that banks can continue to loan money. He does not believe this is either a recession or a depression, both of which behave very differently and do not have the potential for an end to the crisis that a vaccine or treatment would provide.
There are other important unknowns, such as whether there will be a second wave of new COVID-19 cases, and whether CMHC (the Canada Mortgage & Housing Corporation) will tighten its lending policies, which could slow the recovery process down. However, if those don’t come to pass, it’s our personal opinion that we saw the lowest point of the GTA market in April.