The first coronavirus case in Canada was found on January 27th, 2020. The rapid spread of this virus throughout the world quickly took a toll on the global economy. Some sources estimate that the virus could cost the global economy upwards of $2.7 trillion. You might think this means that the real estate market in Toronto will show similar effects as the global economy, but let’s look at how the Toronto real estate market responded to other global issues:
SARS’ Affect on Toronto Real Estate
Back in 2003, Toronto experienced a similar outbreak to the coronavirus during the SARS crisis. Let’s look at how the SARS outbreak in Toronto affected the real estate market:
Unsurprisingly, home sales in Toronto decreased by about 10% compared to the previous year over the first four months of 2003 during the peak times of the SARS outbreak.
Additionally, during the SARS outbreak in Toronto, house prices still continued to grow by about 6% per year. While this was a decrease compared to the previous year’s growth in house prices, they still continued to grow throughout the outbreak. This shows that the overall housing market in Toronto remained competitive even during these trying times.
2008 Global Recession Effect on Toronto Real Estate
Another comparison we can make to what might happen with the CoVID-19 outbreak in 2020, can be found from Toronto’s reaction to the 2008 global recession. During this time when other housing markets around the world were collapsing, Toronto remained relatively unscathed. When looking at a graph of housing prices, you can barely even see when the 2008 recession occurred.
Prices hit their lowest point during the 2008 recession in December, reaching a median price of just over $300,000. In October of 2008, when the recession first started, median prices were $377,000. The prices almost completely recovered by February of 2009 coming back to a median price of $370,000 and ended up significantly growing by the end of 2009 with median prices at over $445,000. The data leads us to believe that although the temporary drop in price was significant, it was artificial. As soon as the hysteria subsided, our fundamentally strong market bounced back to previous levels, and continued to rise at an unprecedented pace. This all happened within a short few months, not years. Housing prices continued to grow at record rates between 2009 and 2018, showing how robust the Toronto real estate market really is.
What This Means for the 2020 CoVID-19 Pandemic and Toronto’s real estate market
While we can never predict with absolute certainty, we can make comparisons to past events to pull insights into how current events might affect Toronto real estate. Always keep in mind, to know one’s future all one has to do is to look at their past. When looking at the impact of SARS and the 2008 global recession on the Toronto housing market, we can expect similar outcomes with CoVID-19.
While we expect total housing transactions to slow in comparison to last year, median prices are still expected to grow throughout the year. This growth in prices comes from the extreme growth in the overall population of the Greater Toronto Area. It’s currently projected to grow by nearly 50% by 2049 making it one of the fastest growing regions in North America. Canada’s pace of growth is expected to add an additional 550,000 residents in 2021 with Toronto taking close to 25% of all new immigrants to Canada.
Toronto is also growing its student base with an 18% increase in study permits compared to 2018. This all leads to an extremely high demand in the real estate market which will keep house prices healthy throughout the CoVID-19 pandemic.
The growth in population also keeps the market as a whole extremely competitive. This high level of competition helps with the pace at which houses sell allowing overall housing sales to remain steady throughout any economic impacts of the 2020 coronavirus. The Toronto housing market is based on supply and demand. We cannot build enough new housing to satisfy new demand.
Another factor that will keep the Toronto housing market steady throughout the CoVID-19 pandemic is its continuous and stable job growth. For the past 5 years, Toronto has been North America’s fastest growing tech market with respect to job growth. In the past few years, Toronto has seen the creation of 228,500 tech jobs, in addition to 733,080 office jobs.
The recent increase in Toronto’s population, has been fueled by the massive creation of new high paying jobs. These high paying jobs allow its employees the luxury to spend heavily on their housing accomodations. When it comes to housing, these individuals will choose location over square footage, and pay more for living close to their workplace.
The fundamentals of supply and demand will continue to hold true for our housing market. Although travel restrictions will temporarily halt migration, once they are lifted the numbers will bounce back fairly quickly as people from around the world will continue to be drawn to markets that require their skill sets. Although no market on the planet will exit this pandemic unscathed, Toronto is better prepared to bounce back than many other parts of the world.
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