2020 was a roller coaster year with unpredictable ups and downs. The first quarter started off strong until the pandemic hit in mid-March. The province-wide shut down in spring resulted in historical low market activity; however, sales quickly rebounded in the second half of the year. For 2020 as a whole, sales increased 8.4% year-over-year. The suburbs experienced the strongest sales growth, especially in single-family homes. New listings, on the other hand, were up only by 2.6%. This disconnect between new listings and sales drove up prices, with the overall average selling price rising by 13.5% to almost $930,000.
The one exception to tightening market conditions was the condo sector. Over the course of 2020, growth in listings far outstripped that of sales as many investor-owners put their properties on the market, driven primarily by stricter regulations surrounding short-term rentals and the prospect of a City of Toronto vacancy tax.
So, what’s in store for 2021? Here are my five predictions.
1. Homeownership will remain strong, supported by continued economic recovery and interest rates holding at record or near-record lows for the foreseeable future. There is the possibility that medium and longer fixed rates could start edging higher later in the year, as recovery takes hold and underlying federal government bond yields trend upwards anticipating rate hikes from the Bank of Canada in 2022 and beyond; however, this will not deter buyer demand.
2. Current owners of single-family homes will be best positioned to cash in on their home equity. Sales will continue to climb while inventory remains tight, maintaining an already strong seller’s market. The overall average selling price for all home types will likely hit the $1 million mark for the first time. As a result, homebuyers may need to explore different property types or look further outside the Greater Toronto Area to secure a home.
3. The pace of new condo listings will start to ebb, especially in the second half of the year. If condo sales growth continues to outstrip condo listings growth, there could be an acceleration in prices, so the first half of 2021 may be the best time to buy.
4. With COVID-19 vaccinations finally underway, immigration and non-permanent migration (think students) will soon resume and fuel demand for rental units. This will help absorb any excess of inventory. Average rents will then stabilize and perhaps even start to rebound. While demand for this type of housing did not wane in 2020, the number of condo units listed for rent at one point almost doubled compared to 2019. This increased supply resulted in more negotiating power for prospective tenants, as well as a decline in average rents.
5. While mortgage deferrals were initially a concern early on in the pandemic, most property owners who took advantage of such agreements did so out of an abundance of caution rather than financial necessity and have since resumed their regular payments, according to Mortgage Professionals Canada. As a result, an uptick in mortgage delinquencies and, subsequently, flood of new listings on the market is unlikely. This means the key challenge over the next year and beyond will be a familiar one: lack of supply.