Market vs Covid-19 | Survival of the Fittest

Real Estate has long since proven to be a lucrative investment for most Canadians. Over the years some Canadians have aimed to become a home owner, while others seek to become serial investors. Toronto (GTA) over the last decade has shown significant growth in Real Estate Development, with big celebrity names and foreign investors taking heed.

  

Canada has held strong over a decade now since our last recession that took place in 2008, that was historically known as “The Great Recession.” While the recession lasted just about seven months in Canada, it left devastating effects on our economy. That said, Canada’s records show that the last 2 recessions we’ve experienced being; 2008-2009, 1990-1992, were both considered “Category 4’s.” Which on the scale is pretty bad, but not the worst. Recessions are a natural part of the economy, however predicting when one will happen isn’t down to a science. Some seem to think our record breaking, over 10-year recession-free run, may soon be over with COVID-19 on the attack. 


Now let’s dig a little deeper. What classifies a recession? A recession; is a prolonged period of time in which an economy’s activity declines. This is usually measured over 2 quarters of negative growth. Some indicators that the Government look for when determining a recession are; Yield Curve (Interest rates on bonds and treasury), Labor Market (Job growth/loss/unemployment rate, wage inflation), and GDP (Gross Domestic Product) growth; which represents the markets value of goods and services produced within our country at any given time. Of course there are more factors, however the above mentioned are just a few of the major indicators. Real Estate stats are viewed as an indicator as well. Being that we are still in fairly early stages of it all, it is difficult to determine what the long terms effects may be. So let’s asses the market more closely and determine some of the effects we’ve seen so far! 


According to the stats I found on the Toronto Real Estate Board (TREB). The Market for most of the first quarter of 2020, was undeniably Hot. January and February’s numbers weren’t too far off, from the inflated numbers we were seeing back in 2017. Most of you may remember 2017 was what us real estate professionals refer to as a, “Super sellers' market.” Which occurs every so many years. That year homes were selling like hot cakes. Buyers found themselves in bidding wars and the winner was usually left to pay a heavy price tag above market value. Some of those homeowners are still trying to recover from that today. We saw a lot of that same behavior happening in the market in the earlier months of 2020. Inventory was low and buyers were being forced to compete, which drove up the number of offers on each property and ultimately the purchase price. I’m sure most of us Realtors were preparing for an active spring. Then came COVID-19, reminding us all that the market and the world as we know it, can be unpredictable.  


March 2020 ended strong all things considered; as COVID-19 was still in its early phases for Canada. We closed March with; 8,012 total complete transactions, an increase of 12.3% compared to 2019, with an average selling price of $902,680 overall, showing a year-over-year increase of 14.5%.  


Now fast-forward through to all of the closures, social distancing, and other measures being ordered by our government. The Toronto market has definitely been impacted, according to data assessed from Mid-March to the end of April. Let’s put that into some perspective, shall we? TREB reported that most of March’s sales activity happened in the first two weeks. From March 15th to the end of March we saw a 18.4% decline compared to end of March last year.  

Now let's take a look at April’s numbers that were released just days ago. April closed the month with a total of 2,975 transactions (Down 42% from March & down 67% compared to 2019), with an average selling price of $821,392, which is down 0.1% year-over-year. The number of new listings to hit the market is probably the most interesting; The total number of new listings in April 2019 was, 17,212 and total number of new listings for April 2020 were 6,174, down 64% year-over-year. That is insane, I know! It would lead some to believe we are in for some big trouble, possibly a recession? Well what can we learn from this data?  


Let's break it down... we saw that January, February, and half of March were hot. The second half of March declined and continued to decline through April. The amount of overall sales happening in the GTA declined. Number of new listings up for sale declined, BUT March showed a 14.5% increase in the purchase price. Also, a 0.1% increase for April. What this means to me is people are still confident in Real Estate! The slowdown in transactions reflects what is happening right now in the world. People are unsure of what move to make. All the uncertainty surrounding us would of course force people to carefully evaluate their position and even halt their plans to buy or sell completely. Asking themselves, “Is it worth the health risk?” and/or ” Should we wait for more data?” The important thing is the numbers are still holding strong. Yes, they have declined, however we are not in the negatives. The value aspect is still there in the mind of the consumers. We are already making efforts to re-open businesses etc., and depending on how it goes we may see an increase for May and/or June. The consumer’s confidence has been challengedhowever as the fear begins to subside in the minds of our society, I have faith that confidence will be restored in the marketplace and buyers/sellers will be eager to get back out there. 


To conclude, will Canada see another recession caused by this COVID-19 Pandemic? The short answer is, I really cannot say for certain. As we’ve learned, the market as well as the economy are at times very unpredictable. Unlike the 2008-2009 recession, which lasted 7 months for Canadians. We have in my opinion this time around, managed to mitigate some of the problems that could lead to that end result. We’ve been working vigilantly on implementing protocols and procedures that will hopefully help with getting us back on track as a country, sooner rather than later. While I understand things seem a little murky right now - with job uncertainty, future health concerns and contradicting media information. It is important for us to know we can still get through this. We can come out of this and bounce back if we keep ourselves informed and not allow fear of the unknown to hinder our decisions. WE CAN GET THROUGH THIS TOGETHER! I predict the second half of 2020 is going to be much like January and February. We will close this year with our average sales being right where they should be. I will continue to keep you up to date, but until then stay strong and confident. We are not in hot water just yet!  

Comments:
Chris Brown on May 7, 2020 8:10 PM posted:
This information was well put; very important and helpful in keeping the confidence of us buyers still interested in purchasing or investing in the market. Thank You Asha

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