The Toronto real estate market has a reputation for being hot! Jam-packed with amenities, there are so many reasons why homebuyers and renters flock to this dynamic, metropolitan city.
Yet, the COVID-19 pandemic has caused shifts for some parts of the market. For instance, no longer are certain segments eager to rent in the Toronto market, leading to sliding rental prices. Further, precautions to ensure safety during the virus even caused some to reevaluate their current lifestyles, impacting activity within the Toronto rental market as a whole.
Here are some of the trends in the Toronto condo market which could explain why rental prices continue to trend downwards:
Toronto Real Estate Early in the COVID-19 Pandemic
A sharp contrast to the purchasing market which seemed to rebound in a few months and had record-high sales in September, the Q2 rental market in Toronto was clearly affected by the COVID-19 pandemic. This has had prolonged effects on this segment of the market overall. By the end of the second quarter, there were 24.8 per cent fewer apartment rentals on the market compared to Q2 of 2019.
State of Toronto Rental Prices
According to the Toronto Regional Real Estate Board (TRREB), in Q2 the average one-bedroom condominium apartment rent was $2,083, down five per cent from Q2 2019. Meanwhile, the average two-bedroom condominium apartment was renting for $2,713, which is a 5.6-per-cent decrease from the same quarter the previous year.
There are several reasons why rental prices are being pushed down in the Toronto market:
Condo supply has brought a lot of inventory back to the market.
Job loss during the pandemic could have reduced financial power for renters, causing many to stop searching.
Restrictions on showing homes could have also halted renters from searching for an appropriate unit.
Less migration due to COVID-19 border control has resulted in fewer new immigrants renting in the city.
Students have been spending less time in the city due to post-secondary school closures or the shift toward online learning models.
Rising Toronto Rental Inventory
As the virus raged on, there was a continuation of rental listings versus rental transactions, leading to growth of the overall market. This has resulted in less competition in the market due to increased inventory and perhaps lowered demand thanks to changing housing preferences.
According to the TRREB, the number of condominium apartments on the market was up by 42 per cent year over year. Now that renters now have more choice, this has led to year-over-year declines in average rents in Q2.
Yet, condo owners are considering either turning their properties into long-term rentals or selling altogether. This could result in further supply in the coming years.
Typically, landlords have had the upper hand in this market, often resulting in bidding wars. Yet, for renters who have the financial means, recent conditions allow them to benefit from a more balanced market.
Shifting Preferences Emerge in Toronto Housing Market
During the early stages of the COVID-19 pandemic, an unprecedented shift took place. Due to social distancing and other public safety protocols, people were forced to spend the majority of their time confined to their condos.
The boundary between home and workplace was quickly blurred when many businesses pivoted to remote working arrangements and schools shut their doors, prompting parents to homeschool.
Many condo and apartment dwellers were uncomfortable with the shared spaces of a multi-unit living environment such as a lobby, elevators and other facilities. The required close proximity to others induced fear and anxiety.
For those who rent condos in Toronto, the time spent cooped up inside led to increased desire for larger floor plans and access to green space. While the benefits (and glamour) of city-living were long sought after, the limitations of a city lifestyle were quickly realized during the pandemic.
This shift is evident in the increased demand in neighbouring suburban areas like Durham region.
Low Interest Rates
The Bank of Canada slashed its benchmark interest rate to 0.25 per cent; great news for those looking to jump into the housing market. Renters who have been sidelined pre-pandemic due to expensive housing, may now be able to borrow money at a reduced rate. These move up buyers can be another factor explaining lower demand for rental units and the resulting downward trend in rental rates.
The Toronto real estate market has historically been a popular, highly competitive place to rent a property. Yet, demand and activity in this segment of the market have declined. While COVID-19 exposed challenges to city living, there are also seismic shifts in the attitudes people have toward their living arrangements. As homebuyers are setting their sights upon properties and communities promising more indoor and outdoor living space, some renters are also following this trend, leading to decreasing rental demand and prices within the city.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
