03/20

Investing

Coronavirus and Toronto Real Estate: is Now the Time to Buy or Sell?

As global concerns escalate and stock markets tumble in the face of COVID-19, one thing is for sure—we don’t yet know enough about this disease to forecast its impact. It is this uncertainty, more than anything, that will wreak havoc on our economy in the short term—but what will it mean for local real estate markets?

This isn’t the first time a pathogen has swept through Toronto in the 21st century. Back in 2003, the outbreak of SARS (also a coronavirus) had striking similarities. Looking back at the city’s real estate market before, after, and during that crisis, we can start to get a better sense of the impact that a global health concern may have this time around.

SARS and the Market: by the Numbers

Reports of the disease from China began in January 2003, and by March, it had become a global pandemic. Toronto was one of the most impacted places in North America. The disease had the city under arrest for nearly six months, with global concerns tapering as early as May.

So, how did Toronto’s real estate market perform through this social and economic crisis? Historically, this global pandemic had little impact on Toronto’s growing real estate market and zero impact on decreasing housing prices. Here are the numbers:

• In March of 2002, before the SARS outbreak, there were 3,040 sales in Toronto with a dollar volume of 918 million and an average home price of $302,000.

• In March of 2003, at the height of the outbreak, there were 2,909 sales in Toronto with a dollar volume of 916 million and an average home price of $315,000. 

• In March of 2004, after the outbreak, there were 3,494 sales in Toronto with a dollar volume of 1.16 billion and an average home price of $331,000.

We can see from these statistics that SARS may have affected the number of people buying and selling. However, Toronto’s growing demand for housing and lack of supply continued to increase pricing—despite stock market frustrations and global economic concerns. By all appearances, this historic trend remains unchanged today. With Toronto’s vacancy rates below 1% and estimated population growth of over 100,000 each year, supply and demand will continue to be the strongest driver of the city’s real estate market.

Historically, a global pandemic has had little impact on Toronto’s growing real estate market and zero impact on decreasing housing prices.

There is, however, one segment of the real estate market that may be impacted by the latest outbreak of coronavirus—and that’s Toronto’s luxury market.

A Disaster for the Luxury Market?

Since the real estate correction of 2017, Toronto’s luxury market has had a slow path to recovery. Growing global economic concerns, a significant decrease in international buyers, a newly- implemented foreign buyer’s tax, and increased lending restrictions have created a perfect storm for this market segment.

When it comes to buying and selling real estate, many high-net-worth-individuals (HNWIs) are motivated by consumer confidence, economic conditions, and stock market performance. For these buyers, real estate is more of a commodity than a necessity. Unless it makes financial sense to purchase a piece of property, they will most often continue living well in their current dwellings.

As COVID-19 continues to beat up international stock markets (and China takes steps that are halting its economy, the second largest in the world), HNWIs are less likely to make seven-figure-plus purchases.

Currently, Rosedale-Moore Park, arguably Toronto’s most exclusive and prestigious neighbourhood, has only 15 houses for sale—a shockingly low number as we enter the spring real estate market.

When it comes to buying and selling real estate, many high-net-worth individuals are motivated by consumer confidence, economic conditions, and stock market performance.

What is more concerning is the number of days these homes are sitting on the market. The city of Toronto’s average days on market for new listings sits impressively at under 20. These 15 properties have combined days on market of 81—and in fact, the actual number may be closer to double this, since many of these homes have been re -listed more than once and continue to remain unsold.

Seeing the Forest for the Trees

It’s clear that the luxury market is being impacted by the coronavirus, but how great that overall impact will be remains to be seen. Having said that, there’s reason for buyers and sellers to be optimistic as we move forward. I had a recent conversation with one of Toronto’s most successful investment advisors who confidently told me, “this too shall pass, and things will go back to normal as they always do.”

Considering the recent inquiry he made into a $4.2M listing of mine, I suspect that he, like other savvy investors, will continue to seek market opportunities during this crisis.

Wondering if now is the time to tap into Toronto’s market? Get in touch to start a conversation about investing in Toronto real estate today.

Adrian Mainella

Adrian is an innovator, a problem solver, and a trusted expert in Toronto real estate.

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