At the moment, the real estate world — much like the rest of the world — is wildly unpredictable. Talk of a cooling housing market has been circulating since the pandemic first disrupted our lives. Yet September, October, and November set records for housing sales in Toronto. (Warning, if you bought a house in the 1980s with a 20-percentage, you may want to skip this next sentence.) HSBC just announced Canada’s first-ever 0.99% mortgage. In this week’s edition of the DORR Insider Report, we look at how those remaining in Toronto are navigating this new reality.

DECEMBER ARTUNCERTAINTY CAUSING UNBELIEVABLE RESULTS

Despite December temperatures creeping into the negatives, the Toronto real estate market is showing zero signs of chill. According to Toronto Regional Real Estate Board (TRREB) data, Canada’s largest city reported increases in several key indicators.

• 24.3% rise in YoY sales
• 13.3% uptick in average selling price (all home types combined)
• 10.6% increase in the MLS® HPI Composite Benchmark (Nov. 2020 vs. 2019)

RENT DECLINING IN HIGHRISE LIVING

With so many Canadians opting for more square footage to work, play, and learn from home, demand for smaller living spaces is on the decline. November 2020 data from Padmapper shows Toronto one-bedroom rent dropped 2.4% in the last month alone to land at an even $2,000 per month. This represents a yearly decline of 14.9%. Meanwhile two-bedroom units held steady at $2,650 per month, however that still reflects an 11.7% decrease from this point last year. For perspective on this decline, the last time rent was this low was September 2017.

HUGE GROWTH IN HOME RENOS

According to a recent report by HomeStars, 80% of Canadians surveyed were still planning to take on home improvements despite COVID-19. Homeowners may be (understandably) cautious about contractors entering their home, but that didn’t deter them from breaking ground on new renovations. While new jobs were mostly outdoor endeavours and repairs around the home, nearly 20% of those surveyed were embarking on larger projects. And with travel for work and pleasure at a virtual standstill 21% of homeowners reallocated vacation and travel money towards home improvements. Of those larger projects, 14% had a price tag between $5,000 and $10,000 and 20% came in around $20,000 or more.

WHO’S BUYING AND WHAT’S SELLING

Compared with November 2020, the average price for all property types rose by 13% to $955,615. This included increases of 15% for detached homes, and 13% for semi-detached homes and townhouses. The lone decrease was among condominium apartments which tumbled 2%. It is evident there are now two distinct real estate markets in Toronto: one for houses and one for condos.

In November, the region saw a decline in listings from 17,000-plus in October to 11,545. It also registered 8,766 transactions (purchases/sales) which marked a 24% increase compared with this time last year. Of those nearly nine thousand transactions, nearly half were detached homes (49%), 1 in 10 were semi-detached homes, 18% were townhouses, and just over 1 in 5 were condos (23%).

Unpacking the GTA numbers, Toronto saw the most transactions with 3,032 and an average sticker price of $979,224. King City held the top spot with an average selling price at $1,541,366, however those numbers may not tell the full story due to its 53-transaction sample size.

Numbers published by Mortgage Sandbox revealed 35% of homes in Metro Toronto sold for $1,000,000 and $1,499,999, with a median cost of $1,050,000. According to Statistics Canada, only 10% of the population have the necessary $200,000 and over household income to afford to buy at that price.

The pandemic has thrown much into question. The announcement of new restrictions and a second lockdown in late November devastated many Canadians. However negative sentiment may be buoyed by the first public vaccine injections. No one knows what the future will hold, but one thing is for sure: we’ll keep a close eye on the market and share everything we learn with you.

Dorr Capital is a specialist in debt investing in land and construction in the GTA. www.dorrcapital.com 416-484-9747.

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Update – June 29/2021

We have launched RealAlt Investments – a Mortgage Fund Trust, licensed under the Exempt Market Dealer, investing in Land & Construction development, building communities in Ontario. For more information please visit this web page on our site.