Toronto continues to beat the drum of pent-up demand. But is it too optimistic?

It’s raining fortune cookies for Toronto real estate. The GTA real estate market is continuing its splendid run and how. September proved to be a blazing month for the real estate community of Toronto as it saw strong sales even this late in the year, trumping previous year’s records.

The Toronto Regional Real Estate Board (TRREB) recorded 11,083 homes sold during the month, a 42.3 % rise from September 2019. Prevailing low-interest rates, pent-up demand from millennials & young professionals, increased consumer confidence and job growth, fuelled the home sales trajectory for Toronto real estate, even at a time when the Covid situation doesn’t look too favorable.

Though the government is doing its due to check the riding Covid cases, it hasn’t deterred people from their homebuying spree, which is evident in the record year-on-year sales growth. Detached homes led the pack with 54.7% increase in sales, followed by semi-detached at 53% and townhomes at 46.9%. Condo apartment sales saw a slight rise by 14.6%.

A shift in liveability trends

However, the liveability trend has shifted in the last few months as people, concerned about the effects of the pandemic, have steered their home seeking radar towards the suburbs. People are looking for more breathable space and have no regrets in shunning the city life, as they flock to the green suburbs where outdoor space is in abundance.

The amenities of the city, the arts and culture center, shopping arcades and cosmopolitan lifestyle are not the checkboxes homebuyers are looking for. Around 34% of Canadians are unhappy about the liveability of where they live and hence are planning to shift base to the countryside.

The effect is palpable as demand for detached homes is higher in Toronto and its suburbs than condos.

Demand for detached homes skyrocket

Thanks to the impact of Covid on the ways we live, work and study, homebuyers are making a beeline to buy detached homes. What was once a huge condo market, is now one where sellers are struggling to sell or rent condo units as average rent prices tank and fresh interests from investors dry up. Clearly, the tectonic plates have shifted.

Single-family dwellings have skyrocketed in demand and value, mainly because people are going for roomier homes which can double as a workstation. According to the Canada Mortgage and Housing Corporation (CMHC), 654 detached homes broke ground in the month of September, a whopping 98% year-on-year increase rate over the previous year which saw the construction of only 330 homes.

Optimism flickers as slowdown beckons for condos

It may be hard to believe that after being a beast for a good part of 2020, Toronto’s real estate market is softening. Much of the blame has been attributed to the condo market, infected with slowing sales and rising inventory.

The sale of condos stood at 1,596 units last month, a 36.9% increase compared to 1,166 condo apartments last year. Though the average price of condos increased 4.5% from September 2019, it plummeted 0.3% compared to August 2020. Compare that to six months ago, and the benchmark price decrease is 0.9%.

The weakening demand for condos will lead to diverging price trends across regions and housing categories. As for homebuyers who are looking to buy condos, 2021 can be a good time as prices will soften to boot.