The housing market in Canada, and especially in Toronto, has proved to be a resilient one despite the coronavirus pandemic and all it brought upon us. Real estate agencies such as Condo Mapper International quickly adapted to the new normal, and everything was back on track after the spring lockdowns.
Future of the real estate market
Even though many predicted the opposite, the real estate market in Toronto and most of the parts in Canada did quite well. From the look of things, the real estate market will continue its good run this fall, probably till the end of the year as well.
However, a new report by Moody Analytics suggests that in 2021 house prices in Canada will drop by 7%, which includes Toronto and the Greater Toronto Area.
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The report suggests that Prairies will get hit hardest once the government support stops. The report notes that insolvency proposals and bankruptcy filings have been increasing in the last two years. Now, once the mortgage payment deferrals fade away and consider rising joblessness, many people will struggle to make their payments.
Furthermore, recent data suggest that the pandemic keeps on widening economic inequality, affecting the housing market.
Demand for houses
What’s baffling some real estate experts is that the demand for houses has continuously been increasing since the start of the summer. In Toronto, the housing sector was and is still doing quite well. Saying that houses will drop by 7% seems somewhat unrealistic to them. People selling their apartments and replacing them with houses with ample space is one of the biggest trends of 2020.
At the same time, even those that don’t agree with this prediction, a 7% drop in the housing sector, fear the effects of a prolonged economic recession and a high unemployment rate. Then there is the USA situation, which also has a massive effect on Canada’s economy, especially on the local economy in Toronto.
Around 25% of the export products in Canada flow south to the border. Plus, the vast majority of the tourists in Canada come from the US. So, how the coronavirus got managed in the US will be felt in Canada and Toronto. Unfortunately, it seems that the US is not handling the pandemic as it should as the coronavirus related fatalities increased to 200,000. If this unfortunate trend continues to grow in the US, the number of coronavirus fatalities will reach 300,000 by the end of 2020.
A coronavirus vaccine in 2021 is the wild card that can turn the tables in the housing market. But even with a vaccine available in the first quarter of 2021, it remains unclear to what extent that will influence the economy and the real estate market.
If the vaccine is delayed, it will further deepen the recession, and the housing market will feel that.
It’s also certain that the low mortgage rates won’t be as effective as in 2020 unless the unemployment rates decrease and the economy improves.