After the March 2020 declaration of COVID-19 as a pandemic and a province-wide stay-at-home order, the year was one of uncertainty. But, did that uncertainty extend to the GTA’s housing market? As seen in TRREB’s Market Year in Review report , not exactly. Read on for three major impacts on home buyers, sellers, and mortgage holders in 2020.
1.The Greater Toronto Area (GTA) saw an increase in home sales in 2020 – but why?
GTA home sales reported through TRREB’s MLS® System increased by 8.4 per cent over 2019. This was even aftera steep drop in market activity in the spring brought on by COVID-19. Sean Simpson, Ipsos Vice President, says in the recent Ready to Real Estate podcast “Buying, Selling and Renting Trends in 2021” that, despite its obvious negative impacts on Ontarians’ health, a majority – about eight in 10 – benefitted financially from COVID-19.
“Fewer people are going out and vacationing, going out for dinner, doing other things that they might spend their money on over the course of a regular year,” Sean explains, “and what that’s meant is that people have more money in their pockets at the end of the day.”
The extra disposable income from COVID-related savings afforded home buyers the ability to make larger down payments. The fact that many people quickly transitioned from the traditional office to working from home also provided extra confidence to make a home purchase. Sixty-four per cent of Ontarians who bought a home in the last year did so sooner than they would have because of pandemic-related economic factors.
2.The condo market is a “wild card,” but likely only in the short term.
While home sales overall increased in 2020, condo sales actually cooled slightly. Interest trended away from busy downtown areas and the prevailing type of dwelling – condos – by seven points, to just 19 per cent.
A major reason could have been the decreased desirability of condominiums as investment properties. With tourism all but dried up, very few can take advantage of short-term rental opportunities like Airbnb. In addition, many sectors of the economy that have traditionally been drivers of rental demand faced more sustained job losses, which meant traditional rental transactions were also in doubt. Four in 10 current condo investors are thinking of selling.
However, as Sean says, this should be seen more as a “blip” than a permanent trend. As the prices of single-family homes continue to appreciate with high demand and restricted supply, condos will become a more attractive option to price-conscious home buyers.
And, as TRREB Chief Market Analyst Jason Mercer points out in the podcast , “It’ll be interesting, as we see a broader global rollout of vaccine, whether we start to see a renewed interest in looking back downtown” Gaining control over COVID-19 could also coax home buyers back to the condos – and post-pandemic social lifestyle – of the downtown core.
3. Our mortgage market – and mortgage holding Canadians – are set to weather all but the worst economic storms.
The fail-safe mechanisms and mortgage stress tests implemented by our major lenders mean that Canadians are unlikely to see a mortgage-related financial crisis like the one that plagued our neighbours to the south in the 2008 recession.
In fact, COVID-19 showed that mortgage holding Canadians are particularly averse to the notion of defaulting on their payments. About 1 in 8 mortgage holders took advantage of the payment deferral programs introduced at the start of the pandemic. This brought about the idea of a “mortgage deferral cliff”: that a massive number of holders would default when deferrals came due in the fall.
In reality, fewer than one per cent defaulted. “We know now the vast majority of people that took part in those mortgage deferrals initially did so really from a self-defense perspective, rather than an ‘I’m in immediate danger’ perspective,” says Paul Taylor, President and CEO of Mortgage Professionals Canada on Ready to Real Estate .
Adds Jason, “People are loath to default on their mortgages – [they] have a lot of skin in the game.” Indeed, past Ipsos surveys have found that intending buyers – including first-time buyers – generally have down payments above 20 per cent of their purchase price.
To learn more about the shifts in real estate and mortgage trends our experts tracked for 2020, and see what’s on the horizon for 2021 and beyond, catch up on TRREB’s podcast, Ready to Real Estate .