The Pandemic in Perspective – Toronto Area Real Estate 2020-2021

The Beginning of the Pandemic

When the government first announced lockdowns in early 2020, the real estate market in Toronto shut down almost completely. Buyers, sellers, and real estate agents alike had no idea as to how or even whether to show properties or transact offers. “Virtual” became the order of the day, and agents encouraged buyers to make offers, sight unseen, based upon virtual tours. Sales plummeted and it seemed as if the entire market might grind to a halt.

Just one month later, however, the market bounced back strongly. Real estate agents worked out how to show properties safely, as masks, sanitizer, and minimal touching of surfaces became standardized. We banned in-person open houses and devised ways to conduct ‘virtual’ open houses. Also, we learned how to connect with our clients via Zoom, and to present offers online.

The Beginning of Work From Home

By late spring of 2020, the market was again booming. Prices and sales volumes recovered quickly, and then something else happened. The Covid restrictions had facilitated the rapid expansion of work-from-home, an idea that had been around for a while but had been resisted by many in corporate management. As more and more employees spent much of their working time in a home office, it dawned on them that this was a perfect opportunity to improve their quality of life. Without the need for a long daily commute to the city, they could buy a bigger house on a bigger lot in one of the surrounding areas, close enough for occasional commuting downtown. Thus began a sort of diaspora to the east (Durham region), west (Halton region), and north (York and Simcoe regions). The mass exodus has increased real estate prices much more quickly outside the City versus downtown.

Low Mortgage Rates Goose the Market

There was more, however. Mortgage interest rates have stayed extremely low throughout the pandemic, and this has provided jet fuel for buyers to enter the market or move up to a bigger home. Also, some homeowners hesitated to sell, uncomfortable with strangers coming into their homes and potentially spreading the virus. This led inexorably to a surge in demand combined with a contraction in supply which, unsurprisingly, has pushed up prices very quickly.

Prices for Detached Homes in the GTA

The chart below shows average prices for detached homes in the City of Toronto and surrounding areas:

Halton – Oakville, Burlington, Milton, Halton Hills
Peel – Mississauga, Brampton and Caledon
York – Richmond Hill, Markham, Aurora, Newmarket, Vaughan, King
Durham – Pickering, Ajax, Whitby, Oshawa
Simcoe – Innisfil, Bradford, New Tecumseth, Essa

These numbers are jaw-dropping, to say the least. The average price in the surrounding areas, over the past two years, has been almost 50%. Further, every one of these areas now has an average price of more than $1 million. The City of Toronto has also done well, but outside the City has done 60% better.

Nor is this the end of the story. All areas have also dramatically increased total sales over the past two years. The outside areas increased sales by an average of 38%, while City of Toronto sales went up by 23%. Once again, the outside areas were stronger but the City also did well.

Prices for Condominium Apartments in the GTA

The story for condos is similar but dramatic in a different way. Prices for condos outside the City increased by an average of 28% over the past two years, while City of Toronto condo prices increased by “only” 13%.

Sales, on the other hand, increased by a whopping 48% on average outside the City, and by 41% inside the City.

The Bottom Line

The biggest price increases, for both detached homes and condos, happened in 2021, and there was a general acceleration of the price increases during the latter half of last year. Will we see a continuation of the trend this year? Or will higher interest rates, as are being generally forecast, finally put a damper on the market? 2022 will be interesting, to say the least.