As we enter the winter months, did the housing market lose momentum?
How did the second wave of Covid impact the market?
The November market statistics just came out and it was yet another record month of super strong sales.
In this episode, we’re not going to focus on the November numbers.
Instead, we’re going to look at trends.
And we’re going to break things down into the city vs the suburbs, low rise vs high rise.
We have lots to cover, so let’s dive in!
Let’s start with:
#1 Historical Statistics
This graph shows you the total number of sales we’ve had in the Greater Toronto Area since 2008.
The Great Recession in 2008 brought us to the lowest number of sales.
Then it went to the peak in 2016.
And it started declining due to the crash in the low rise market, which was caused by new government policies to improve housing affordability.
The level that we are currently at is already 18% higher than 2008 despite the fact that we’re still 1 month short in sales because we don’t have the numbers for December yet.
That’s the number of sales. What about the price?
You can see the price drop from 2017 to 2018 and that’s in line with the drop in sales.
Overall, the average price has been pretty much trending all the way up since 2008.
#2 2019 vs 2020
Let’s zoom in and see how this crazy 2020 differs from 2019.
We started 2020 with very strong sales.
Then Covid hit in March and you see that immediate sharp drop in sales.
Surprisingly, the recovery was almost as fast as the drop and that’s why you see that V-shape in the graph.
By July, the number of sales was already 29% higher than last year.
See that gap between the two lines, they have a similar shape due to normal seasonal ups and downs, but the 2020 sales were consistently around 30% higher than 2019.
The market has been super active even under Covid.
Now, let’s look at the price.
Keep in mind that these are average prices so we have to be very careful on how we interpret them.
There was a big drop in the average price in April.
Remember there was also a huge drop in the number of sales at the same time.
There were very few transactions and most of them were on the low end.
So that brought the average price down, but the absolute prices didn’t actually drop.
We had an in depth analysis on this topic back in May, I’ll put a link below so you can review that afterwards.
So when we are looking at an average price graph, we shouldn’t focus too much on specific points and values, but we should be looking at the overall trend instead.
2020 vs 2019 average prices, there’s also a consistent gap between the two lines.
In general, 2020 average prices were roughly 15% higher than 2019.
That’s an overall view of 2020, but high rise and low rise, City of Toronto and suburbs were very different this year, so let’s break things down.
I will be referring to the City of Toronto as the 416 area.
And everything else in the Greater Toronto Area outside the City of Toronto, such as Richmond Hill, Markham, Vaughan, will be referred to as the 905 area.
The low rise market will include detached houses, semi-detached houses and townhouses.
The high rise market will be condos.
Ok, let’s get to:
#3 The Low Rise Market in the 416 Area
In terms of number of sales, the graph is similar to that of the overall market, with that same V-shape rebound.
Sales were generally 20 to 30% higher than last year after the rebound.
In terms of the average price, the trend is around 10% higher than last year.
#4 The Low Rise Market in the 905 Area
The number of sales were significantly higher than last year after the rebound.
60% more than last year in September and still 33% more in November.
This shows that the suburbs have become extremely popular during the pandemic as people are choosing more space over the proximity to the city centre.
In general, houses are roughly 25% cheaper in the suburbs than in the City of Toronto.
So with the same budget, you would be able to get a much bigger house in the suburbs.
Well, when things get popular and there’s a lot of demand, prices go up.
See that gap between the 2020 and 2019 average prices.
The trend is showing a widening gap.
Currently, the gap is 18%.
#5 The High Rise Market in the 905 Area
Number of sales, looks similar to all the other segments.
Even condo sales in the 905 area are 20 to 30% higher than last year.
Price? We also see a gap, but it’s much smaller than the low rise market, only around 5 to 8%.
#6 The High Rise Market in the 416 Area
This would mainly be condos in the downtown Toronto area and this graph is going to be different than all the other market segments.
We see that same V-shape rebound in sales, but there’s no gap between the two lines.
This means the number of sales this year was the same as last year, which is actually not bad at all.
But what this graph doesn’t tell you is that the number of listings doubled from last year.
And that’s because of a struggling rental market in downtown.
The root cause? No immigration and no international students.
Increased supply, decreased demand. Of course, there would be downward pressure on the price.
Prices started to trend down around 3% lower than last year.
Like I said last week, if you’re lucky, you might be able to get an 8% discount.
If you are an investor looking through these graphs, which area would you invest into?
Of course, investors are all opportunistic in nature and they would naturally be attracted to the weakest point because that’s where the biggest opportunity is.
We know the root cause for the price drop is no immigration and no international students.
The million dollar question is…
Do you believe this root cause will be fixed?
The UK has already started rolling out the Covid vaccine earlier this week. The US is just a few days behind. Canada should follow just shortly after.
And we have the most aggressive immigration plan in place for 2021.
So if you believe that the root cause of the problem will soon be fixed, then of course, you would see downtown Toronto as a great opportunity right now.
If you believe that we’re saying goodbye to downtown Toronto forever, then of course you wouldn’t be investing.
It wouldn’t be long until we find out the answer.