As a result of COVID-19, the Province of Ontario has closed all non-essential businesses, effective March 24, 2020. While every industry has been profoundly impacted by efforts to help “flatten the curve” and contain the virus spread, Toronto Homes for Sale has taken a significant hit. These businesses are seeking ways to manage this crisis, limit financial losses and understand what relief, if any, is possible.
With a group of hard-working Real Estate Agents Toronto, C12 Homes Team, grew rapidly and solidly. We work with many clients in the real estate industry including brokers, commercial and multi-residential real estate owners, investors, developers, design-build companies and finance providers.
Below, we have outlined the impact of COVID-19 on the Real Estate Market in order to help our clients or these businesses to take measures financially and operationally.
Real Estate Market
Real estate agents Toronto have been deemed essential services; however, there have been key changes to the way they must operate and there is uncertainty how the market will perform as the pandemic evolves.
A sharp rise in joblessness, combined with the bust-out of the short-term rental market, will send house prices down in the short term, some market experts are saying.
And for some homebuyers ― those who are still in decent financial shape in this crisis ― that presents a rare opportunity for bargains in some of Toronto’s priciest cities.
According to the Toronto Regional Real Estate Board, Toronto homes for sale were down 69 per cent in the first 17 days of April compared with a year ago. Many buyers have decided to hold off on purchases amid uncertain economic conditions. As well, experts are predicting a drop in residential selling prices due to factors including higher unemployment and the slowdown in tourism, which in turn impacts short-term rental business.
The Market Watch Data from March through May below illustrates exactly how Toronto homes for sale market trend directions:
Greater Toronto Area REALTORS® Real estate agents Toronto reported 8,012 Toronto homes for sale through TRREB’s MLS® System in March 2020 – up by 12.3 per cent compared to 7,132 sales reported in March 2019.
However, despite a strong increase in sales for March 2020 as a whole, there was a clear break in market activity between the pre-COVID-19 and post-COVID-19 periods. For the purposes of this release, the start of the post-COVID-19 period was the week beginning Sunday, March 15.
The overall March Toronto homes for sales result was clearly driven by the first two weeks of the month. There were 4,643 sales reported in the pre-COVID-19 period, accounting for 58 per cent of total transactions and representing a 49 per cent increase compared to the first 14 days of March 2019.
There were 3,369 sales reported during the post-COVID-period – down by 15.9 per cent compared to the same period in March 2019.
For March as a whole, new listings were up by three per cent year-over-year to 14,424. However, similar to Toronto homes for sales, new listings dropped on a year-over-year basis during the second half of the month (beginning March 15) by 18.4 per cent.
The MLS® Home Price Index Composite Benchmark price was up by 11.1 per cent year-over-year in March 2020. The average selling price for March 2020 as a whole was $902,680 – up 14.5 per cent compared to March 2019. The average selling price for sales reported between March 15 and March 31, was $862,563 – down from the first half of March 2020, but still up by 10.5 per cent compared to the same period last year.
Greater Toronto Area REALTORS® Real estate agents Toronto reported 2,975 residential transactions through TRREB’s MLS® System. This result was down by 67 per cent compared to April 2019. Weekday Toronto homes for sales remained within a relatively steady range during the month, averaging 130 per day.
New listings amounted to 6,174 in April 2020 – down on a year-over-year basis by a similar rate compared to Toronto homes for sales (-64.1 per cent).
The average selling price for April 2020 transactions was $821,392 – up by 0.1 per cent compared to the average price of $820,373 reported for April 2019. The semi-detached and townhouse market segments experienced annual average price growth above the rate of inflation. The condominium apartment and detached segments experienced year-over-year price declines on average.
The trend for the MLS® Home Price Index Composite Benchmark, which had been on an upward trajectory since the beginning of 2019 flattened in April. On a year-over-year basis, the Benchmark was up by 10 per cent.
The MLS® HPI indices represent prices for typical homes with consistent attributes from one period to the next. The fact that the MLS® HPI was up year-over-year by a greater rate than the average selling price suggests that the share of higher end deals completed in April 2020 versus April 2019 was down.
Greater Toronto Area REALTORS® Real estate agents Toronto reported 4,606 sales through TRREB’s MLS® System in May 2020. This result was down by 53.7 per cent compared to May 2019. While the number of sales was down substantially on a year-over-year basis due to the continued impact of COVID-19, the decline was less than the 67.1 per cent year-over-year decline reported for April 2020.
On a month-over-month basis, actual and seasonally adjusted May Toronto homes for sales were up substantially compared to April. Actual May 2020 Toronto homes for ales increased by 55.2 per cent compared to April 2020. After accounting for the regular seasonal increase that is experienced each year between April and May, seasonally adjusted sales were up by 53.2 per cent month-over-month.
The number of new listings entered into TRREB’s MLS® System in May was down by a similar annual rate to that of sales, dipping by 53.1 per cent to 9,104. On a month-over-month basis, actual new listings were up by 47.5 per cent.
The MLS® Home Price Index Composite Benchmark price was virtually unchanged in May 2020 compared to April 2020. On a year-over-year basis, the composite benchmark was up by 9.4 per cent. The average selling price for all home types combined was up by three per cent compared to May 2019 to $863,599. On a seasonally adjusted basis, the average selling price was up by 4.6 per cent month-over-month compared April 2020.
The difference in year-over-year growth between the MLS® HPI Composite Benchmark and the average selling price was related to the fact that home sales in the City of Toronto, particularly in the detached segment, were down by a greater annual rate than overall sales in the GTA. This resulted in a compositional impact on the overall average selling price.
Despite the market uncertainty, there are still those who need to buy or sell right now, for various reasons. Real estate agents Toronto have had to quickly pivot to providing services virtually rather than relying on traditional open houses.
Real estate Development
Real estate development during the COVID-19 pandemic has obviously become more complex since revenue is project based and profit is earned at project completion. Public show rooms have closed, and economic instability has slowed down new investment, and in some cases existing investors are pulling out of projects.
Unfortunately, real estate developers are feeling more pain as the government programs for which they are eligible are limited. However, most real estate development projects will continue to receive financing through the major banks.
Property Management Companies and Landlords
Property management companies and landlords, whether multi-residential, commercial or industrial, have had their struggles. While many landlords received rental payments for April 1, there are indications that collecting rents for May 1 will be a much greater challenge. For the most part, we have witnessed landlords and tenants showing a sense of empathy and community by working with one another. Some larger commercial landlords have announced temporary rent deferral for small businesses or independent businesses. Particularly in the case of commercial and industrial landlords, they recognize the need to work with tenants to help cover costs rather than be trapped in a situation where they have vacant properties over the longer term.
However, the key thing to remember for both tenants and landlords is that a lease is a legal document, and both have rights and obligations to fulfill under it. A tenant cannot simply stop paying rent citing COVID-19. If a tenant has financial difficulties, they should proactively start a dialogue with their landlord and work together. And keep in mind that a rent deferral is not rent forgiveness.
For landlords concerned with how COVID-19 will impact their ability to preserve cash or even pay their mortgage, a six-month mortgage deferral program offered in partnership with Canadian banks, the federal government and the Canadian Mortgage and Housing Corporation has provided some temporary relief. There is concern over how such deferred funds will be paid back at the end of the pandemic. Banks are also continuing to accrue interest on the mortgages.
Deferral of Municipal Tax and Utilities
The deferral of municipal taxes and utility payments for property owners and commercial landlords have also provided some additional assistance during this uncertain period.
As an example, on March 16, the City of Toronto implemented at 60-day grace period for property tax payments and payment penalties. The City has also extended the due date for utility bills issues by an additional 60 days to give utility customers additional time to take advantage of the early payment discount.
Depending on the municipality in Ontario, there are different arrangements for property tax or bill payment relief. It is important to check with your municipality to see if and what measures might be available.
The New Normal
he COVID-19 pandemic will undoubtedly change the way we live and work for the foreseeable future, and new trends will emerge that will become part of our ‘new normal.’
The low interest rate environment and financial asset price volatility will support the case for portfolio diversification. ‘Flight to safety’ in Toronto homes for sale, which continues to offer better relative returns in comparison to other asset classes, looks set to increase.