We are living in uncertain times, unprecedented times. Did you ever imagine that we would see something like this in our lifetimes? That the WORLD, the ENTIRE world would be impacted in ways so significant and some unimaginable but this is now our every day – social distancing, working from home and connecting through the virtual world. This is our new ‘normal’ which will have perhaps a dramatic lasting impact on our everyday lives into the future. Life as we knew it may have changed forever.
Personally, it feels like we are living in a movie and at this point only Will Smith in his Men In Black suit can save the world. For now, the real heroes are the health care professionals and all essential services workers – my heart is full of gratitude for the work they are doing and the sacrifices they are making everyday to serve us and keep our families healthy and safe. THANK YOU to each and every one of you and your families.
The First Effects of COVID-19 in Toronto Real Estate
When COVID-19 arrived in Toronto, we were in the middle of one the city’s strongest spring real estate markets. An active market with motivated buyers and sellers holding offer dates on listings. As TREB (Toronto Real Estate Board) recently announced numbers for March 2020, it is evident that both physical distancing measures and economic uncertainty have led to an overall slowdown of the housing market in the Greater Toronto Area (GTA) – despite strong home sales at the start of the month and a strong start to the year.
The province declared real estate as an essential service to help ensure that sales agreements that already been entered into would close, and ownership transfers could occur. Realtors and Brokers rushed to re-invent how we buy and sell homes with virtual showings, electric signatures and through limited to no in-person meetings. Open Houses were banned on March 21. Real estate activity continued, however it was not business as usual.
The big question here is how deep are these effects and how long will this last and ultimately what this means for Toronto Real Estate in 2020 and the near future? In order to truly understand the depth of impact we have to rewind a few weeks back pre-COVID-19.
How was Toronto real estate doing at the start of the year 2020?
2020 was off to a roaring start. According to the February results from the Toronto Real Estate Board (TREB), overall sales were up 45% over February of 2019. Condos increased 25%, and in downtown condos specifically it was 24% over the year before.
Sales numbers for January confirmed that 2020 was going to be a strong real estate year – I intentionally use past tense because the future even for real estate remains uncertain. All numbers were indicating that we were to expect a lot more listings in the latter half of March and April.
Other factors in play pre-COVID-19: banks had lowered mortgage rate spiking lending activity and the government had revised the stress test bringing more buyers into the market.
For the purposes of this report, we will consider before March 15 pre-COVID-19 and past March 15 as post-COVID-19
How has COVID-19 impacted Toronto real estate thus far?
Toronto Real Estate Board released the March 2020 statistics:
Greater Toronto Area REALTORS® reported 8,012 home sales through TRREB’s MLS® System in March 2020 – up by 12.3% 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 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% of total transactions and representing a 49% 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% compared to the same period in March 2019.
For March as a whole, new listings were up by 3% year-over-year to 14,424. However, similar to sales, new listings dropped on a year-over-year basis during the second half of the month (beginning March 15) by 18.4%.
According to TREB President Michael Collins, “Uncertainty surrounding the outbreak’s impact on the broader economy and the onset of the necessary social distancing measures resulted in the decline in sales since March 15. Sales figures for April will give us a better sense as to the trajectory of the market while all levels of government take the required action to contain the spread of COVID-19.”
Bank of Canada Lowers Rates
On March 27th, 2020, the Bank of Canada lowered the overnight rate again for the third time this month. This was the third such cut in March, after a scheduled cut on March 4th, and an unscheduled cut on March 14th. The current key lending rate is 0.25% from 1.75% at the start of the month. Many banks dropped their prime rates another 50 basis points to 2.45% following Bank of Canada’s emergency rate cut. As of April 8th, prime rates are currently at 2.45%.
However, mortgage lenders have begun to raise their rates as a result of recent liquidity concerns and risk premiums. Lowering variable rate discounts and increasing fixed rates.
Mortgage Deferrals
On Wednesday 18th March, six of Canada’s largest banks announced they would be allowing mortgage payment deferrals of up to six months. These included RBC, TD, BMO, Scotiabank, CIBC, and National Bank. The banks also announced they would offer “opportunity for relief” on other credit products.
As of April 3rd, over 500,000 requests for mortgage deferrals had been processed or completed. From what we’ve heard many people are having trouble getting in touch with their lenders during this time, as a result of the increase demand for their services and lenders are reporting they are overwhelmed with the increased volume of requests.
The mortgage deferral program is designed for people who NEED it and not for those who WANT it. If you are employed and working you will not qualify for a mortgage deferral. Speak to your lender. Each lender will work on a case-by-case basis to determine the qualification for a mortgage deferral or extension, whichever the case may be.
This blog post is written by Madiha Khan, founder of Toronto Condo Investments and Sales Representative with Century 21 Atria Realty Inc.
