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Toronto Real Estate Market

3 Impacts of the 2nd Lockdown on Toronto Real Estate Market

Again… We’re going back into lockdown again.

The first time that we ever experienced a lockdown was March 17, 2020.

10 months later, when we thought we were getting out of Covid…

We’re actually going back into lockdown.

But did you notice a big difference now that we’re doing it for the second time?

How did you feel when you heard about lockdown for the very first time?

Fearful.  Anxious.  Uncertain.  Panicky.

Because we had no idea what to expect at all.

What about this time around?

Frustrated.  Annoyed.  Fatigue.

But we don’t really panic anymore because we pretty much know what to expect.

You see, experience teaches us valuable lessons that we can’t learn anywhere else.

During the first lockdown, the majority of headlines were predicting a major crash in the Toronto real estate market when all the mortgage deferrals expired.

Once we turned into 2021, even with this 2nd lockdown in sight, almost all predictions are pointing to a very strong market for 2021.

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It’s definitely a good thing to see that most people are a lot more positive on this second round lockdown, pretty much just waiting for the vaccine to come into effect.

Now, I do think the lockdown is going to have 3 impacts on the real estate market.

#1  The market is going to slow down

Similar to the last lockdown, the market was very hot just before going into the lockdown.

With the stay at home order, it wouldn’t make sense to say that there’s no impact on the market, the market is going to slow down for sure.

During the last lockdown, both sales activities and prices were frozen.  

There were a lot of uncertainties in the market.  No one knew what to expect.

So everyone decided to just wait and see.

What about this current lockdown?

Sales activities should come down because people need to stay home.

But compared to the last lockdown, people are a lot more confident about the outlook of the market.

Some people may even see this slower period as an opportunity to get the property they want, with virtual viewing and signing.

So I would say activities will slow down but won’t be frozen like last time. 

And in terms of price, it will likely stay stable for the month of lockdown.

#2  Household savings will increase again

Last week, we saw that the household saving rate went from the usual 2% to a record high of 27.5% during the last lockdown.

Once again, people have to stay home, no going out to eat, no travelling, nowhere to spend money.

Besides, the government relief programs are going to be extended, which means more money printing.

You see, more and more money will get accumulated in people’s pockets.

When the chance comes, people would go out and spend that money.

They could be buying assets or liabilities, doesn’t matter, it just means that there is more money chasing the same amount of goods.

More demand, less supply, prices go up.

That’s going to happen when people can start going out to spend money again.

There’s an interesting term called “revenge spending”.  It means that people’s desires have been suppressed for too long and once they get the chance, they will spend money like crazy.  It’s like a therapy.

#3  A big rebound

Last year, sales activities took a deep dive down going into the lockdown and then quickly rebounded coming out of the lockdown.

Remember that V-shape recovery?

This time, I think we’re going to see something more like a checkmark instead of a V.

Sales activities are going to go down, but not as much as last time.

And the rebound is going to be even stronger than last time because demand is suppressed once again and this time, with even more accumulated savings.

In terms of price, I will be sticking to my predictions at the very beginning of this month.

Low rise prices will continue to go up 5 to 10% this year.

High rise prices will come back up to near the pre-Covid level in the later half of the year.

Over the next few weeks, I’m going to monitor the market very closely and of course I’ll be sharing statistics and trends with you.

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