Toronto Real Estate Market

2021 Predictions on the Toronto Real Estate Market

Welcome to 2021!

The whole world was so excited to kick 2020 away.  Don’t worry, the sky is always the darkest just before sunrise, things always seem to get worse before they get better.

So, we’re going to have an exciting year ahead because everything will be climbing up from the rock bottom.

A return to normal is now in sight because most Canadians are expected to get vaccinated by September.

And if you’re opportunistic, we actually have that once a decade opportunity to grow our wealth from a recession recovery right now.

Let me share with you, my 2021 predictions on the Toronto real estate market.

#1 Low Rise Home Prices Will Grow Another 5-10%

In terms of employment income, the middle class families are generally unaffected by the pandemic and they are the main drivers of the low rise market.

With a stable income stream, the middle class is actually taking advantage of the historical low interest rates to upgrade their homes.

The need to stay home a lot more and so the desire for more space is driving people to take actions instead of waiting on the sidelines.

I would say that the historical low interest rate will stay for 2021 and the need to stay home will remain for another 6 to 9 months, so the demand in the low rise market will remain strong.

Strong demand, not much change in supply, prices will go up, I’d say roughly 5 to 10% in 2021.

#2 Downtown Condos Will Comeback

Downtown condos got the biggest hit from the pandemic and prices were down roughly 5 to 10% in 2020.

One of the major changes is of course the work-from-home trend and whether this trend will be here to stay is still up for endless debate.

Well, I do think there will be massive changes to the office spaces in downtown Toronto.

We all know that Amazon is one big winner of this pandemic crisis and you know what they did just a few weeks ago?

Amazon made a bullish move to lease 5 additional office floors in the South Financial Core in downtown Toronto around the Union Station.  That’s an additional 100,000 square feet of office space.

What about Shopify?  Remember they announced back in May 2020 that its employees may work from home permanently even after the pandemic?

Well, in June, Shopify exercised its option to take an additional 90,000 square feet of office space, bringing its total to 340,000 square feet in the King West area in downtown Toronto.

Google has also confirmed that they will be taking up 100% of the office floors at 65 King East in core downtown Toronto.  That’s 400,000 square feet of office space across 18 floors!

Netflix is another extremely successful company and its CEO calls remote working “a pure negative”.

“I don’t see any positives.  Not being able to get together in person, particularly internationally, is a pure negative.”  He’d like his workforce to return to the office “12 hours after a vaccine is approved.”  Of course, that’s exaggerating, but that shows you his take on work from home.

And if you haven’t watched Apple’s YouTube on “The whole working-from-home thing”, I highly recommend it.  It totally showcases the truth about working from home, it’s one big mess.

So what do these top companies in the world have in common?

They do things differently than traditional companies.  They are extremely innovative and they emphasize on company culture.  Innovation and company culture are the hardest to build remotely.

So I do think many companies will have to move out of downtown.  You know, companies that have not evolved and improved to adapt to new changes in the world.  Companies that do things that can be easily replaced by robots.

On the other hand, many new companies will be moving into downtown to take over those spaces.  Companies that develop AI, Artificial Intelligence, will be huge in this decade.

You know, robots that can do deliveries, AI in medical research and healthcare, driverless cars and so on.  It would be extremely difficult to develop cutting edge innovations remotely.

There will be massive changes in the office spaces in downtown Toronto because the companies who occupy the spaces will be very different.  Out with the old, in with the new.  Companies that always do things the same old way will be eliminated and replaced by companies with innovations.

Speaking of medical research and healthcare, which will definitely be another booming industry post-pandemic…

We have Canada’s best hospitals and medical research centres in the heart of downtown Toronto.

I don’t see them going anywhere else at all.

I mean, we can’t do x-rays and surgeries at home, right?

And what about those rats used in research?  The doctors and scientists can’t bring them home.

When it comes to medical research and AI developments, the University of Toronto and Ryerson University are closely tied as well.

Virtual learning?

Let me share a survey with you.

1,000 global students from 89 universities from around the world expressed their thoughts on virtual education.

65% of students dislike virtual learning environments necessitated by the pandemic.

79% reported lower overall performance and outcomes.

The academic part is just one thing, I would say that the campus life experience is one of the most important reasons for going to universities.  

Nowadays, you can learn many things online, but the human interactions, connections and life experiences are all part of that expensive tuition fee.

So I really can’t see the universities going away from downtown Toronto either.

Besides, downtown has all the infrastructures that took years and years to build, the roads, the subway, the whole transit system, water, sewage so on and so forth.

Downtown Toronto no more?  I don’t think so.

Going back to the downtown condos, it’s an investor heavy market.  

Investors generally have a smart eye, as we get closer to normal and as we see a bigger gap between high rise and low rise, investors will see the downtown condo market as a big opportunity.

In fact, many investors have already started taking advantage of the lowered condo prices back in November.  We experienced lost bids in a few multiple offer situations.

So I’m predicting that the momentum in the condo market will pick up again, mostly driven by investors at the beginning of the year.  Then by end-users once they need to get back to work, and by immigrants once the border reopens.

In terms of price points, resale prices will return to the pre-Covid level and pre-construction will continue to get more expensive because that’s buying into the future.

#3 The Rental Market Will Start to Recover

It will take a little longer for the market to recover but I do believe that we have hit the rock bottom.

Immigrants and international students will be key to the rental market recovery and that really depends on the date when the border reopens.

What is certain is that the government is backing us up with the most aggressive immigration plan in history, with over 400,000 new immigrants per year for the next 3 years.

As always, the future is full of uncertainties, but those are my 3 predictions, I hope you enjoyed this post.

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