With the Covid-19 Pandemic wreaking havoc right and left, the real estate market has pretty much come to a halt. Not that it has hit the pause button – after all, those who have recently bought may need to dispose of with their older properties and those who recently sold may be looking for something new. However, things have slowed down considerably since last month.
As compared to just last week, sales are down 50%, and if pitted against 9th of March, sales have fallen off a whopping 6%. Demand is fast dwindling; viewings have dried up and open houses are being cancelled more and more often with each passing week. The only people who are entering the market to buy or sell right now are those who have to. For the cherry on top, we are seeing a lot of panic sales this month. The pressure to get transactions done as early as possible is driving prices down significantly, putting sellers at a disadvantage.
Is This What A Buyers’ Market Look Like?
We often measure market health by the “Sales to new listing” ratio. Anything below 40% is what we call a buyer’s market, marked by low competition, low demand, and anything above 60% is a seller’s market, characterized by high demand, high competition. Market health has just plummeted down to a mere 35% from a healthy 61% last week, turning the tides towards a market favorable to buyers only. This explains why the average selling price dropped by about 8.5%. last week.
Even though we have entered a buyer’s market in certain segments, freehold homes under $1.2M and condos under $650K are still selling over asking. But even then, we have seen a 105% to 102.5% drop in average sale vs. list price. Despite the pent-up demand from the overheated market, there are more listings than there are buyers. Even though home sales haven’t stopped, the competition is waning. Where there would have been up to 20 offers on a property just last month, you are hardly likely to see one or two today.
What Does It Mean For The Condo Market?
When compared to the freehold market, condos seem to be performing a tad bit better. While the freehold properties have seen a 10% reduction in the average price per square foot, condos have fared better at 5%. Condos are also seeing a better “sales to new listing” ratio than freeholds. While condos are also sliding down the rabbit hole into the buyer’s market, they are still seeing more action than other property types. This could be due to the fact that a downturn in the stock market has badly hit people’s savings, resulting a reduction is down payment.
Not to mention, Mortgage rates are soaring through the ceiling these days and banks are not as generous to part with their money as before. This is further hampering what people can afford. Last but not the least, condos are generally easier on the pockets than freehold properties. With people looking for cheaper options in these times, condos come out as a clear winner. people are able to afford less and are more willing to look for condos instead of houses.
Toronto Condo Team experts predict a 2.9% fall in sales over this time last year. If you’re selling your home, you cannot expect full value at the moment. However, for the silver lining on the cloud: government incentives and low interest rates will buffer the decline, and Toronto is sure to rebound quickly once the Covid-19 Pandemic is dealt with. Be prepared to see a bounce-back in migration, strengthening job markets, an all-time low interest rates, as well as a 40% increase in project home resales, come 2021.
Toronto Always Bounces Back
Once the Covid-19 crises has appeased a bit, the factors that have been driving the GTA market will attack in full force again; low inventory coupled with an ever-growing population who will soon be looking for a place to live. Immigrations are still in full bloom with a larger share of new Canadians settling in the GTA. After all, it is not the first crises that has befallen the Toronto real estate market.
Remember SARS 20 years down the road? Guaranteed, social media wasn’t as prevalent in 2003 as it is now, so SARS didn’t receive the limelight Covid has stolen. Also, SARS didn’t impose social isolation or the potential for mass quarantine as Covid has. In the absence of mass panic, the housing market wasn't impacted. In fact, SARS resulted in an increase in both average sale prices and year-over-year sales.
Also, if we talk about the global financial crisis in 2008, when sales dropped from 8000 in the July of 2008 to a pittance of 2,577 in December of that same year. Urban and suburban markets saw a 4.4% drop in sales prices. But we came out triumphant at the other end, and GTA property prices doubled, and in some cases even tripled, in the next five years. By the April of 2009, prices had hit a record high and sales went over the roof. Moral of the story; just try to weather the storm and the market will recover!
Judging from past crises, first there’s a period of uncertainty and panic in the face of a calamity, followed by a period of low activity. As the crises begins to subside a bit, sellers start listing their properties and buyer confidence starts building again, teetering on the edge at first. But due to a scarcity of listings, buyers jump to buy whatever they can, driving demand and prices higher. More and more sellers jump back into the market, and soon we recover and come out more successful than before. Fingers crossed
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