➕‘2021 was not 2020, but it was definitely not your typical year in Toronto Real Estate. We ended last year’s report stating that “If nothing else, we’re looking forward to 2021 and we’re better prepared for any challenges that it may present!” Yes, overall it was a ‘good’ year and yes, we were better prepared for 2021 – though it was not without its challenges, especially for those not already ‘in the market’, but who were looking to buy a new home or condo. A few key insights…
➕[insight #1] how it started + how it’s going
The numbers from the first half of 2021 show a very different market than those in the 2nd half. Buyers and Sellers who had held off in early 2020 continued to come back. Low interest rates, job creation, increasing supply, and a desire for new living spaces fuelled record buying and selling. Then, come summer – the market cooled – somewhat because it was summer [and covid restrictions were easing], but ultimately because significantly fewer Sellers were listing homes for sale and inventory became limited. Yet, prices continued to appreciate despite the restricted inventory due to sustained demand from Buyers. So overall, the difference between the first half and second half of the year is largely a story of limited supply, not demand. That brings us to our second insight:
➕[insight #2] supply remains a pre-requisite for affordability
If you heard one thing echo consistently throughout the year, it was that Toronto Real Estate prices are becoming ‘out of reach’. In fact, affordability is one key factor in the growth of suburban sales and price growth. 2020 and 2021 saw many Buyers looking outside the city for greater value. But what is driving the lack of affordable home ownership in Toronto? Simply put, supply and demand. In the context of Toronto Real Estate, we have significantly limited supply and sustained demand. Digging deeper, supply is not a short term fix, nor a transient issue. We have seen government take steps in the right direction with initiatives – requiring affordable housing in future Toronto condo projects, laneway housing, expedited approvals, and the upcoming ‘garden suites’ – but it is safe to say more needs to be done.
➕[insight 3] remote work + the condo resurgence
Love it or hate it, remote work continued through 2021. Buyers seeking larger spaces and greater affordability found themselves looking outside of Toronto. After two years in the pandemic, prices in the suburbs have escalated significantly. Yes, the suburbs remain less expensive than Toronto, however the gap in affordability has considerably lessened. Interestingly, when all the major market segments saw a lull in sales in the 2nd half of 2021, the Toronto condo market saw continued growth in both sales and price. It appears [pre-omicron] that as covid restrictions loosened in the late summer, the economic recovery seemed eminent, and organizations were considering a return to office – there was a correlation to demand for Toronto condos. Moreover, the trend was present in both resale and rentals. It will be interesting to see what impact, if any, the resurgence of the Toronto condo segment has on suburban Real Estate markets.
All in all it was another atypical year, which one could say is fast becoming ‘typical’ for Toronto Real Estate. Let’s take a look at some of the key numbers from 2021.
So where do we go from here? We, along with everyone else, are looking forward to some greater sense of normalcy this coming year – but will it translate into the Toronto Real Estate market? Our predictions for 2022 are born from three key questions.
1. what is the future of remote work?
Some organizations that once thought remote work would be a temporary condition of Covid have since developed longer term ‘remote work’ policies, whereas others companies are steadfast in their goal to get employees back in the office, and even more linger somewhere in between, trying to determine how their post-pandemic workplace will operate. How the ‘return to work’ plans play out will have an impact on Toronto Real Estate – but we anticipate that demand for Toronto Real Estate, and its immediate suburbs will continue to rise as we ease out of covid-restrictions, into daily commutes and towards normalcy.
2. when and how fast will interest rates rise?
The Bank of Canada has continually signalled that 2022 will see interest rates rising. How many increases, and how fast the interest rate, and correlated mortgage rates, rise may result in dampening price growth over the course of the year. However, given that the looming interest rates increases are well-known, we anticipate increased market activity with Buyers pre-emptively taking advantage of lower interests while they still remain. It’ll make for an interesting and busy spring market.
3. can supply be increased?
Unfortunately for new Buyers, we anticipate affordability to remain a barrier to market entry until we find a means to increase supply. And for those Buyers with the budget to make offers, we expect that the desire to get ahead of the anticipated mortgage rate increases will keep driving property prices higher in 2022. That said, we expect to hear more debate on housing affordability solutions as it becomes a key issue in the upcoming provincial and municipal elections.
Overall, we anticipate Toronto Real Estate will remain a competitive real estate landscape with strong price growth, likely in the double-digits, especially so for the detached, semi-detached and townhome segments. Like last year, we predict it won’t be achieved via a typical path.