Restrictive measures on personal movement will impact how quickly Toronto’s real estate market will roar back to life.
If loosened and business activity resumes by the end of June, the Greater Toronto Area (GTA) may see a year-over-year increase of 1.5% to its aggregate home price by the close of 2020, according to a recent report by Royal LePage.
Should restrictions remain in place longer and business activity not resume until late summer, home prices will remain relatively stable. The region could see a decrease of 0.5% year-over-year in aggregate home price.
This is good news given the economic fallout from COVID-19 is expected to drive national home prices down by 3% year-over-year if the pandemic continues to heavily impede personal movement for several more months.
Why the more favourable outlook for Toronto?
Home prices typically decline when the market experiences sustained low sales volume while inventory builds. Currently, inventory is very low, matching low sales volumes as people respect government mandates to stay at home.
At the start of 2020, Toronto’s housing market experienced a surge in sales with growing upward pressure on home prices. This resulted from pent up demand that was released in the second half of 2019, when federal mortgage stress test measures implemented a year earlier had largely been absorbed by the market and consumer confidence began to build.
Since mid-March when all three levels of government declared a state of emergency, the impact of COVID-19 on the economy has been swift and violent, with layoffs driving high levels of unemployment. In the ensuing four to five weeks, home search activity on popular real estate websites declined more than 20%. Home showings were also down by more than two-thirds, based on Royal LePage sampling.
As government eases out of strict stay-at-home regimens, sales volumes will return; however, traditional real estate practices will not. Public open houses won’t be coming back any time soon. Instead, the industry will continue to leverage technologies that allow a home to be shown remotely. As well, client interaction with Realtors will be limited to one-on-one or two-person meetings and video conferencing to abide by social distancing protocols. This will continue for months.