Real estate prices in Toronto are coming down. According to the Canada Mortgage and Housing Corporation (CMHC), condominiums in the Toronto real estate market will further pull the area's industry downwards.
Spiralling Downwards
According to CMHC, "Anticipated increases in the supply of condominium apartments will lead to softening prices next year."
In June, Toronto real estate prices reached an absolute high. However, the Canada Mortgage and Housing Corporation has been predicting that those prices will start to go down during the fall. There are two primary factors to this; low immigration and unemployment. The COVID-19 pandemic causes both factors.
According to Canada Mortgage and Housing Corporation, the absence of high demand for oil on an international scale is also considered to be another factor. Limited mobility during this world crisis is driving the decrease in oil prices. This factor will further aggravate the influence on oil-producing regions and the economy of Canada.
Increase In Toronto Real Estate Supply
As stated by the Canadian Bankers Association (CBA), more than 760,000 Canadians have chosen to skip payments or postpone their mortgages. That is roughly 16 percent of those who have mortgages in their bank portfolios.
Soon, a rise in supply in properties from Toronto's homeowners who will no longer postpone their mortgages. That supply, combined with the condominium market inventory, was partly by the short-term rental limitations during this pandemic.
The CMHC explains that "More units could also sit on the market longer as more buyers wait on the sidelines."
They associate that deterioration in demand for unemployment and widespread financial tension.
They also added, "A significant number of condominium units under construction (54,000 units currently) will make its way to the resale pool and further increase supply."
Condo Rental Market
The Regional Real Estate Board (TRREB) has announced how difficult the market for condominium rental got strikes in 2020's second quarter. As stated by The Regional Real Estate Board, the GTA realtors reported around 7,320 apartment rentals in the second quarter. Apartment rentals declined by 24.8% from the same time as last year.
According to Lisa Patel, the President of TRREB, "There are two key takeaways from the Q2 2020 rental market statistics."
Patel added, "First, COVID-19 impacted the demand for rental condominium apartments, due to restrictions on showing units and job losses across many sectors of the economy. Second, we saw the continuation of the pattern experienced over the past year, with year-over-year growth in rental listings far outstripping growth in rental transactions."
The average condominium rental has also declined to $2,084 for a one-bedroom unit and $2,714 for a two-bedroom unit.
Jason Mercer, the Chief Market Analyst of TRREB, said in a statement, "Increased choice led to more negotiating power for renters, resulting in year-over-year declines in average rents in the second quarter of 2020.'
Condo Sales
Homeowners no longer have the option to use the Home Equity Line Of Credits. They can no longer use it as a way of a down payment on investment properties. Odeen Eccleston, WE Realty broker, says that the new CMHC regulation will reduce probable buyers' collection.
Moreover, the average prices in condo sales still manage to hike up by 5.1% year-over-year to $619,707 in the second quarter, as stated by the TRREB. That increase happened while the listings were experiencing a decline of 21.6%£, and the sales dropped by 50.8% year-over-year.
The Regional Real Estate Board has also stated that the City Council in Toronto has ratified a plan to make more housing openings. They are mainly proposing the decline between the semi-detached and detached houses and condominiums.
Toronto Real Estate Market Right Now
Odeen Eccleston has also detected a departure from the city that was stimulated by the COVID-19. These people working remotely are now exchanging their expensive Toronto real estate properties for a cottage country.
Mr. Eccleston says that "They can get so much more for so much less in a lot of these cottage countries."
However, Mansour and Eccleston say that the heat is still in the Toronto real estate market.
Eccleston added, "In the 905, especially in the below $700K price range, it's still on fire."
Mansour stated, "I've even sold a few condos with multiple offers in the Beaches and surrounding areas."
She mentions that some of the condominiums continue to be appealing despite the new trends.
Mansour explained, "In areas like the Beach and Leslieville, or places where condos are more low-rise loft or boutique style, the demand is still there. Especially condos with extensive terraces."
Both of these realtors are wart of the inevitable decline. However, they also wonder if the real estate market in Toronto can be better than anticipated. For now, they are notifying other sellers to be cautious and act now before they go down the drain.
Do you think that the supply of condominiums affects the Toronto real estate market? Did Covid-19 pandemic affect the industry? Will the market recover?