Despite a global pandemic and enduring the second wave, Toronto’s real estate market is as competitive and hot as ever. Rents are hitting a huge low as an unprecedented exodus from the city begins as remote working becomes the norm. With the many industries suffering through these changes, why is the real estate market still so crazy?
We’ve discussed previously that the Toronto real estate market has always been very competitive. It’s inventory of single-family homes is commonly very low when compared to Toronto’s demand for housing. Additionally, with outdated zoning by-laws and strenuous and complex permit processes, new housing supplies are often slow when coming to completion. But this is all normal for the market. Why is the demand so high right now amidst a global pandemic?
The factor that is driving all of this to the extreme levels we see right now is, quite simply, more buyers are motivated to enter the market. Canada has historic low-interest rates and a shift in buyer priorities. People want to move into their own home. The pandemic has shown the need for space as well as an ability to quarantine in our residences. However, with an already low inventory, competition is fierce. According to an RBC Senior Economist, new listings have fallen over 13% across Canada. Demand is far outpacing the amount of homes available. The real estate market will continue to drive up competition as inventory is unable to meet the ever growing demand.
This fact alone is continuing to drive up competition. Buyers are well aware of the fierce competition. They fear missing out on a home and some listings are receiving over 30 offers, driving up prices across Toronto. Bidding wars are becoming the norm. However, this kind of drive will soon create affordability issues - something Toronto is already too familiar with. Many buyers, particularly first-time home buyers, already struggle with affordability for single family homes, and this spike in competition will only push them out of the market.
We return to the issue of how to overcome this crazy market. Having a good real estate agent is a great asset but even now, that’s not enough. You need to have all your financials ready and your down payment has to be substantial. In a bidding war, you’ll quickly find yourself exceeding your upper limits particularly for homes within the $900,000 and $1.4 million range. You have to be ready to push yourself because it’s not easy in this fierce competition.
As always, we recommend that you look for alternative solutions if you are struggling to enter the Toronto housing market, you may find more success in a co-ownership situation. Co-ownership may alleviate some of the stress when it comes to bidding wars as there are more people to share the financial burden. Unfortunately, with the current conditions, the prices and competition are only going to get worse. We always encourage our buyers to be patient and persevere as we continue to work diligently to meet their needs.