With all the bad news surrounding COVID’s impact on the economy, it’s a breath of fresh air to see some upticks. It seems the “Toronto real estate market is showing signs of strength,” says Larry Weltman. This August saw a 40% increase in home sales from August last year, with average selling prices also up 20% in the same time.
Larry Weltman, who works at AccessEasyFunds Limited, a real estate commission advance company, explains that the trend is not only due to public initiatives. “There’s a lot going on in the private sector that’s helping out real estate. And some of these driving forces may even outlast the pandemic.”
The real estate industry ties into the greater economy and financial world in many ways. So what’s contributing to its good health?
In times of economic hardship like now, the federal government can tinker with interest rates to ensure the demand for borrowing doesn’t dry up. In line with this, the Bank of Canada is keeping rates at a low 00.25%.
Low rates are uniquely attractive for home loans. “Mortgages differ from other loans because, unlike a car which drops in value the movement you drive it off the lot, one expects the value of the property to increase with time,” explains Weltman.
COVID upset Toronto’s real estate peak season this late spring. “A lot of households took a step back in April and May,” says Jason Mercer, chief market analyst with the Toronto Regional Real Estate Board (TRREB).
But now, with the initial days of uncertainty behind us, pent-up demand is out in full force. “We did see a strong uptick in year-over-year new listings,” notes Mercer. On top of that, watching real estate prices rise inspires confidence in the housing market. As with low-interest rates, this upward trend may signal now’s the time to jump in.
Working from home:
The work-from-home trend has been on the rise since even before the pandemic. But it’s shot up significantly, with sectors like professional and informational services likely going to remain at home for a while.
All this equals the demand for more space and more houses. One sees parallel signs of this trend in home office furniture too. “COVID has created huge demand in the home office area,” said one president of a tech company specializing in adjustable furniture. Likewise, home gyms and homeschooling rooms make houses more of a necessity.
New real estate tech:
Digital platforms are transforming the realtor’s work. Video conferencing tools allow for virtual tours. Even “[d]rones can also be used to provide a tour of the area,” says enterprise tech expert Bernard Marr. “For new builds, a drone might capture the feel of a new neighborhood.”
Meanwhile, new, innovative platforms connect realtors and buyers. Larry Weltman explains that “the traditional realtor-buyer intermediating mechanism was rigid, and for many, exclusionary.” Other platforms, like Weltman’s AccessEasyFunds, facilitate realtor commissions to help streamline deals. “Technology,” Weltman goes on, “simultaneously helps supply and boosts demand.”
Moving out of the city:
During the COVID slump, part of the exodus from cities could be attributed to younger apartment-renters moving back with their parents. But that’s not the total picture. Millennials are beginning to earn more, start families, and buy houses. And this is particularly true in Toronto.
As Diana Petramala, at the Centre for Urban Research and Land Development at Ryerson University, explains: “We have underestimated the impact of millennials on housing markets and overestimated the impact of boomers.” This generational cohort shift is making its impact on the housing market.
For now, a convergence of several of these factors is attracting many to the housing market. But low-interest rates won’t last forever, and some of us will return to the office. Also who knows the long-term economic impact of the pandemic, and when and if demand catches up to supply. It’s rather the increasing home-owning aspirations of millennials, along with the disruptive technology for the real estate industry, which point to that short-term optimism so needed in uncertain times.