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Canadian, GTA markets to show resilience through COVID-19: Royal LePage

Canadian, GTA markets to show resilience through COVID-19: Royal LePage

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Canadian, GTA markets to show resilience through COVID-19: Royal LePage

Average Canadian – and GTA – home prices are expected to remain stable this year, despite the challenges brought on by the COVID-19 pandemic, according to the latest Royal LePage House Price Survey and Market Survey Forecast.

If the strict, stay-at-home restrictions characterizing the fight against COVID-19 are eased during the second quarter, prices are expected to end 2020 relatively flat, with the aggregate value of a Canadian home up a modest one per cent year-over-year, to $653,800. If restrictions are sustained through the summer, the negative economic impact is expected to drive home prices down by three per cent to $627,900 year-over-year, the realty firm says.

In December 2019, Royal LePage forecast the national aggregate price to increase 3.2 per cent by the end of 2020.

“The impact of COVID-19 on the Canadian economy has been swift and violent, with layoffs driving high levels of unemployment across the country,” says Phil Soper, president and CEO, Royal LePage. “While it is sad that these people skewed strongly to young and to part-time workers, for the housing industry, the impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate.

“From our experience, with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020,” Soper adds. “Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.”

Broad-based measurements of industry activity point to a sharp decline since the provinces declared states of emergency. Home showings are down by more than two-thirds, based on Royal LePage sampling, while open house gatherings at properties for sale have been reduced to almost zero nationwide. ”

As we ease out of strict stay-at-home regimens, sales volumes will return; traditional home sales practices will not,” says Soper. “The popular ‘open house’ gathering of buyers on a spring afternoon is gone, and it won’t be coming back any time soon. The industry is leveraging technologies that allow a home to be shown remotely and social distancing protocols, where we restrict client interaction with our realtors to limited one-on-one or two meetings, will continue for months and months. This process is inherently safer than a trip to the grocery store.”

The aggregate price of a home in Canada increased 4.4 per cent to $655,276 in the first quarter. When broken out by housing type, the median price of a two-storey home rose 5.1 per cent year-over-year to $770,005, while bungalows and condominiums rose 2.1 per cent and 4.4 per cent to $541,040 and $493,917, respectively. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions.

“If the fight against the coronavirus requires today’s tight stay-at-home mandates to remain in place for several more months, with no semblance of normal business activity allowed, temporary job losses will become permanent and consumer confidence will be harder to repair,” says Soper. “This would place downward pressure on both home sales volumes and prices.

“Equally, if the collective efforts of Canadians slow the spread of the disease to manageable levels, and if promising science and therapeutic drugs are announced, people will return to their jobs, market confidence will bounce back quickly, and we could see Canada’s real estate markets roar back to life, with 2020 transactions delayed but not eliminated.”

GTA market

In the GTA, housing demand outstripped supply, putting significant upward pressure on home prices. During the first quarter of 2020, the aggregate home price rose 7.5 per cent year-over-year to $866,211.

When broken out by property type, the median price of a condominium saw the highest appreciation, rising 8.8 per cent year-over-year to $580,508, while two-storey homes and bungalows rose 7.7 per cent and 3.7 per cent to $1.01 million and $826,186, respectively.

If business activity resumes by the end of the second quarter, the GTA may see a year-over-year increase of 1.5 per cent to its aggregate home price by the end of 2020, to $861,100. If business activity resumes in late summer 2020, the region could see a decrease of 0.5 per cent year-over-year in aggregate home price to $844,200.


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The GTA housing market in January 2020

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The GTA housing market in January 2020

Picking up where 2019 left off, 2020 began with strong sales growth, dwindling housing supply and high demand for ownership and rental housing. January 2020 continued the monthly trend of increased sales coupled with a dip in listings supply. More than 4,580 sales were reported through Toronto Regional Real Estate Board’s MLS system in January 2020, up by 15 per cent compared to January 2019. However, the number of new listings entered into TRREB’s MLS system in January was down 17.3 per cent when compared to the same time last year.

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Increased sales up against a constrained supply of listings resulted in increased competition between buyers and stronger price growth in the first month of 2020. The average selling price for all home types combined was up by 12.3 per cent to $839,363, compared to $747,175 in January 2019.

When it comes to an outlook for 2020, without seeing a significant increase in supply, it is likely that new listings will not keep up with sales growth, and over the next year an acceleration in price growth can be expected.

TRREB calls on all levels of government to create concrete housing plans for the next decade

Since entering a new year and decade, tighter market conditions with increased competition between buyers and pent-up demand for both ownership and rental housing has remained an ongoing phenomenon.

Persistent demand for housing in the GTA market can be attributed to a strong regional economy, including low unemployment, steady population growth and low borrowing costs. However, part of the answer to satisfying the issue of ownership housing is the construction of more mid-density housing to provide GTA buyers with more affordable housing options.

TRREB has demonstrated an ongoing commitment in calling on all levels of government to create concrete housing plans. In fact, since 2015, our organization has released an annual Market Year in Review & Outlook Report to shed light on the issues discussed above, using clear and hard evidence, as well as to offer solutions to other major regional challenges in the GTA, including infrastructure requirements and transportation and traffic issues.

The 2020 edition of the report, subtitled “The Time is Now” is all about planning for growth in the Greater Toronto Area and broader Greater Golden Horseshoe.

With the release of this report each year, TRREB continues to make great strides in working with policymakers and industry stakeholders to present fresh ideas on what is critically needed to accommodate the increasing population across the Greater Golden Horseshoe.

To download the Toronto Regional Real Estate Board Market Year in Review & Outlook Report, visit TRREB.ca. We hope you enjoy reading the report and join in the dialogue.

Michael Collins is president of the Toronto Regional Real Estate Board, a professional association that represents 54,500 professional realtor members in the Greater Toronto Area. You can contact him at trebpres@trebnet.com. For updates on the real estate market, visit trebhome.com.

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