What's in-store for the Toronto and Canadian real estate markets for the remainder of 2021?
The Toronto real estate market continued to experience phenomenal growth in the first quarter of 2021. Many are wondering what can be expected when it comes to the residential real estate market for the remainder of the year.
As we have seen, 2020 was a year that brought enormous changes to how Canadians live and work. To protect each other from global health concerns brought on by the COVID-19 virus pandemic, many Canadians have had to stay home for a large part of the past 12 months. Many have been fortunate and have been able to work remotely, but others have unfortunately lost their jobs or a large portion of their income, and have been force to collect government payments to sustain themselves. Despite all of this, the Canadian real estate market rallied strongly with record-breaking sales in many communities, alongside huge property price increases that Canadians have not experienced since the price surges seen in the 3 years leading up to 2017.
After a year of unprecedented local and global challenges, what can Canadians expect for the remainder of 2021? Here are 4 major trends set to influence the Canadian real estate market this year.
1. Urban Dwellers Leaving Cities
After being forced to spend more time at home, the pandemic inspired many homeowners and first-time home buyers to find more space to live in and enjoy. Given high prices found in urban areas, many buyers from the city had to look in suburban and rural areas for more spacious and more affordable housing.
For those betting on working remotely in the future, suburban and rural areas are where homebuyers are able to get the most bang for their buck. Since March of last year, Canadians have gone through a series of on-and-off lockdowns and social distancing restrictions, making life in the city less desirable.
A number of economic experts have questioned whether workers should expect to continue to work remotely permanently. The findings? Many businesses may want their workers back at the office once the pandemic concerns pass, suggesting the trend of people leaving the city will likely slow down and reverse course in the future. We just don't know when that will happen. That factor largely depends on how the rest of the year will roll out with regards to the pandemic and the government's handling of it.
2. Future Growth in the Condo Market
With homebuyers looking outside urban areas for space, the condo markets in major city centres has taken a hit in the past year as both demand and prices fell. Many condo sellers and investors have suffered as a result.
Profits from condo properties are driven by 3 essential groups: new immigrants rentals, students rentals, and travellers paying nightly rental rates to condo owners. All 3 of these groups have largely left major cities since the pandemic began, and property owners are still waiting for them to return.
However, condo owners in hot markets like Toronto and Vancouver did not sell off their properties en mass like many real estate experts expected. This suggests investors are positive that the country’s vaccination program, along with the higher levels of immigration the federal government is supporting this year, will help restore the condo market back to higher levels seen pre-pandemic. The fact that vaccinations have been ramping up significantly in the past month, and the country is set to admit over 400,000 new permanent residents by the end of the year will likely help support and fill vacant condo spaces over the course of the next year.
3. Less Supply Amid Growing Prices
The surge of housing prices and sales seen during the pandemic seem to be at odds with what economists would normally expect during troubled financial times. Although more people are unemployed and many businesses have shuttered their doors, competitive bidding for homes valued over a million dollars continues on a large scale in cities like Toronto, Mississauga, Etobicoke, Vaughan, Aurora, Newmarket, Oakville, Burlington, Ajax, Oshawa, Thornhill, Richmond Hill, Maple, Hamilton, Kitchener, London, Guelph, Milton, Brampton, and more.
As a result, many Canadian communities do not have a large enough amount of housing available to meet demand. With more people leaving urban areas, even rural communities are being strained.
In Bancroft, a small rural community home to 4,000 people, the number of properties for sale fell by over two-thirds since January of last year, to reach record-low levels of supply available. At the same time, the average price of a home in that area grew by over 80%.
4. Increasing Mortgage Rates
Interest rates on fixed-rate mortgages have been priced at extremely low, record-breaking levels, supporting the unwithering strength of the Canadian real estate market. However, Canadians have yet to see what the effects of marginal increases in the mortgage rate will be.
At the beginning of March, the lowest rate for a five-year fixed-rate mortgage on the market was 1.64%. This is 0.35% higher than the lowest mortgage rate available in January of 2021. As the banks debate whether to increase their rates, many mortgage brokers suggest homebuyers lock in a low-rate while they still can.
These 4 trends all impact the mortgage and real estate market in complex ways. To better understand your options when it comes to securing a mortgage, the services of an expert mortgage broker at Clover Mortgage can go a long way in ensuring that you have the right information and get the best mortgage that is available to you. Our brokers and in-house underwriters are constantly studying the market to ensure that they know about the latest changes and rate, in order to be able to help you make the best and most informed decision when refinancing your current mortgage or purchasing your dream home.