Outlook 2021 – Why it might turn out to be a great year for real estate

Well, thank goodness that’s over.

This was a common refrain, as we all looked forward to the end of what was not a great year in 2020 – at least from a societal and public health point of view.

From a GTA real estate perspective, it was a different story, as 2020 was actually a strong year that finished on a high note. In new homes and condos, November sales were up 68 per cent from November 2019, and 58 per cent above the 10-year average. The benchmark price for new condos was $1 million, up 17.9 per cent over the last 12 months, while new single-family homes sat at $1.27 million, a 15.8-per-cent jump over that period.

During a pandemic.

On the resale side, December 2020 saw the third-best result on record, with 95,000 home sales, according to the Toronto Regional Real Estate Board, while the average selling price reached a new record of almost $930,000.

All of this, during a pandemic.

“The year just ended will easily go down as the most surprising in the history of Canada’s housing market,” RBC Economics summarized in its Jan. 6 Focus on Canadian Housing report.

Now, here we are early in 2021, and the challenges of COVID-19 remain. Still, many experts – including those in this special report and in columns in this issue – believe housing markets in the GTA and elsewhere in Ontario are poised for another strong year.

How? Why? Let’s explore some of the key reasons.

INTEREST RATES TO REMAIN LOW

“It’s no secret that 2020 was a year of unexpected twists and turns, but let’s not forget the things that worked out in our favour,” says Jesse Abrams, co-founder at Homewise, a mortgage advisory and brokerage firm based in Toronto. “For Canadian homebuyers, in particular, interest rates hit record lows and encouraged considerable activity and opportunity in the marketplace. As we head into a new year with high hopes and low rates, there are many homebuyers enthusiastic and ready to enter the housing market or buy their next home.”

In its most recent interest rate announcement, the Bank of Canada again maintained its target for the influential overnight rate at 0.25 per cent – and indicated it may do so until into 2023. Data for the third quarter of 2020 showed strong economic rebound following the sharp decline in Q2, and economic momentum heading into Q4 appeared stronger than what was expected in October, BoC says. COVID restrictions in some areas will weigh on growth in Q1 2021 and cause a “choppy” trajectory until a vaccine is widely available, and Canada’s economic recovery will continue to require monetary policy support.

Translation? Interest rates aren’t going anywhere, anytime soon – quite likely remaining at their current low level for at least the entirety of 2021, as the economy needs time – and help – to recover.

For its part, economic research organization CD Howe Institute recommends the target rate remain at 0.25 per cent until December 2021 at least.

INDUSTRY RESPONSE TO COVID-19

The pandemic and associated restrictions are not just having an impact on the economy and housing markets, but also on how people physically look for new homes. Large scale public grand openings are on hold, with builders, marketers and consumers all having to rely more on innovation and technology.
And it’s working.

“Last year was a challenging one, with the pandemic forcing the closing of new home and condominium sales offices for months,” says Debbie Cosic, founder and CEO of In2ition Realty. “And yet we had the best year in the history of our company.

“We spent time working with our management staff and developers via phone, email and online to strategize for our upcoming new home and condo launches. Once restrictions eased up, we had multiple sellouts as a result of pent-up demand. We devised innovative ways to complete online deals, which represented 50 per cent of our business. We are doing the same this year, as we plan for more than 20 launches in 2021.”

Builders and developers have routinely adapted, devising creative ways to promote, launch and market their properties via expanded Internet presence and extensive use of social media.

“The table is set for a strong entry into 2021,” says Barbara Lawlor, CEO of Baker Real Estate Inc. “We have learned to sell virtually, successfully, despite pandemic restrictions, and technology has definitely been our friend. Being able to complete sales, right down to signing agreements, has paved the way for people all over the globe to purchase. I am proud of how our industry has risen to the challenge.”

If, as many experts believe, the COVID challenges are short term, and once the vaccine is fully rolled out and the recovery takes root, things could take off. And quickly.

In the meantime, though some real estate markets are affected, opportunities do exist. One of them is in condominiums. (See The Appeal of Condominiums, below.)

LOCATION, LOCATION, LOCATION

What does this mean to you? Most prospective homebuyers understand the traditional golden rule of real estate is “location, location, location.” But everything is changing, and new trends are emerging.

More and more people, for example, are looking for bigger homes, more space, larger lots – and some even for out-of-town properties that are conducive to those features. Or in the condo category, features that address their changing needs, such as working from home and technology.

In our recent NextHome Real Estate Survey, for example, 53.29 per cent of prospective buyers said they were willing to look outside of the 416 and 905 areas.

And in terms of what new home and condo features were most important to them, more than 51 per cent cited proximity to greenspace and other natural amenities, followed by work-from-home spaces at more than 30 per cent. And, as always, being close to highway access (28.71 per cent) and transit (28.39) is highly desired.

And no matter where or what you buy, don’t forget this simple but critical fact that escapes many consumers: Real estate is local. There is no such thing as a Canadian housing market, just as there’s no Canadian traffic or Canadian weather.

What’s most important to you is what’s happening in your market. When you buy a home, you don’t buy a national or provincial market. You buy one property, on one street, in one neighbourhood, in one city and region.

So, forget the national headlines. Examine what’s happening in your market. The same applies to the economy.

ONTARIO ECONOMY

All the uncertainty related to COVID aside (and you should always include an assessment of the local economy in your pre-buying research), the economy could rebound more quickly than some initially thought.

Why does this matter?

Because a strong economy, and the underlying fundamentals, are everything when it comes to real estate, specifically, the demand for housing. Economic growth produces job opportunities, which leads to population growth, housing demand and new home development.
And why is it especially important now? Because, as we have written before at NextHome, Ontario has been a strong performer before, during and – while there are no guarantees – quite likely will be after the pandemic.

THE APPEAL OF CONDOMINIUMS

In its latest Market Survey Forecast, Royal LePage is forecasting the GTA will see aggregate home prices increase 5.75 per cent year-over-year to $990,300 this year. The median price of a standard two-storey home is expected to rise 7.5 per cent to $1.18 million, while the median price of a condominium is forecast to increase 0.5 per cent to $600,800. The relatively flat median price projection for condos reflects a modest increase in median price for units in the 905 area, offsetting a slight dip in median price in Toronto.

So, while in the short term, at least, condos experience a bit of a pause in terms of price growth, it actually represents an opportunity for would-be buyers.

“Softer condo prices are now drawing more buyers in,” RBC Economics says. “Existing condo sales soared virtually everywhere in December. We expect condos’ growing affordability advantage over single-detached homes will boost demand in 2021.”

As COVID concerns subside, it’s possible, if not quite likely, that buyers, or new immigrant buyers, will refocus on Toronto, specifically downtown and areas along subways and other major transit lines.

So, looking a little more long-term (and experts advise you should, anyway, with real estate) the future of condos could quickly brighten.

Comfortable and liveable
This year, we plan to continue to develop residential projects that include expansive suites to make condo living more comfortable and liveable for multi-generational families, working parents, young professionals and homebuyers that respond to all tiers of the market.

Toronto and Vancouver remain Aoyuan’s focus for future development, and we anticipate moving forward with more projects in both cities this year.

In Toronto, we continue to build our upcoming 8.6-acre M2M master-planned community at Yonge and Finch in the North York area, which includes five residential towers, approximately 180,000 sq. ft. of office and retail space, daycare facilities, community centre and a new public park.

Fan Yang
General Manager (Canada)
Aoyuan International
aoyuaninternational.com

Incredible resilience
Toronto’s condo segment has shown incredible resilience over the long term, and in particular in response to the unprecedented headwinds of 2020. We expect the market to improve in 2021 as a result of several key factors, including effective vaccines, continued low interest rates and greatly enhanced immigration. We anticipate the first six months of the year will be characterized by increasingly available immunization programs, and that thoughtfully designed and well-situated buildings will outperform in the first half of 2021.

CentreCourt’s 8 Wellesley project will be one of the very first launches of 2021. We recently started sharing our vision for this launch and are excited by the incredible response and robust demand. The launch of 8 Wellesley will be a bellwether for the rest of the industry, demonstrating that purchasers continue to see immense value in luxury downtown projects that are thoughtfully designed and situated on the doorstep of higher order transit.

Gavin Cheung
Vice-President
CentreCourt
centrecourt.com

Positive indicators
This year promises to be better than the one we have left behind. People are feeling that there is light at the end of the tunnel and are much more upbeat about the months ahead.

We are seeing a lot of positive indicators for the market, with a number of new projects planning to launch. There’s pent-up demand for new home product, we have extremely low interest rates, and more and more people are building funds for purchasing.

And as a result of COVID and working from home, many are seeking more space and are looking to purchase a larger property than they once thought they could afford.

Michael DiPasquale
Chief Operating Officer
Dunpar Homes
dunparhomes.com

Vibrant and busy
Last year saw considerable speculation that the GTA real estate market would be severely affected by the pandemic, but surprisingly, this was not the case.

The condo market outside of downtown Toronto, lowrise, resale and cottage properties all saw an increase in pricing. Key to this growth was the terms builders were offering to help the buyers achieve their purchases.

This year promises to be a vibrant year. However, with affordability being a key element for buyers, we see many adjusting the way they live, and some are looking outside of Toronto to buy a home. Add to that the current low interest rates and people are now able to purchase a larger property than they initially imagined.

The condo market in Toronto will bounce back once the pandemic is under control and workers and new Canadians look for housing in the city.

All of these factors contribute to what we believe will be a busy selling year for 2021.

Mark Cohen
Managing Partner
The Condo Store Marketing Systems
condostorecanada.com

Optimistic outlook
We have an optimistic outlook for 2021, with COVID vaccines becoming more broadly available, historically low interest rates and increasing immigration targets. We believe buyers will be active but will place more significant focus on investments that will appreciate in value and make a real contribution to city building with master plans and transit infrastructure.

Our upcoming master-planned development, Grand Central Mimico – the first official transit-oriented development in Ontario, done in partnership with Metrolinx – will cater to this demand. This transit-oriented community, anchored by the Mimico GO station, will include more than two million sq. ft. of mixed-use development, including well-designed public spaces, retail and residential density.

John Vandyk
Founder, President & CEO
Vandyk Properties
vandyk.com

Active and promising
We are forecasting a very active and promising 2021, with pricing holding strong along with market demand. Toronto has an esteemed reputation globally, and with low borrowing rates and strong immigration numbers, paired with a widespread distribution of the COVID-19 vaccine, we expect our incredible city (and its restaurants, sporting events and cultural programming!) to come back to life in the latter half of this year.

From this citywide re-energization, we foresee an increase in buyer confidence to support the many great sites to be brought to market with much success, including our nine-storey boutique Annex residence project at 500 Dupont, and X02, our King West Development at King and Dufferin in downtown Toronto.

Brian Brown
Principal
Lifetime Developments
lifetimedevelopments.com

Flourishing year
The market will remain positively robust for 2021 due to a few predominant factors. Demand for townhomes and single-detached homes has been accelerated by the pandemic, as homeowners are now working from home and the overall importance of a home has changed. Homeowners now want to take advantage of maximizing space and value for their home.

There were record-breaking sales in lowrise in 2020. Southwestern Ontario recorded the largest volume of sales in 2020, as homebuyers relocated to secondary markets outside the GTA. Your average pre-construction price per sq. ft. in Southwestern Ontario is approximately $600, compared to approximately $1,200 per sq. ft. in the GTA. For example, pricing on homes in Hamilton saw nearly a 10-per-cent increase in 2020, despite the pandemic, and this increase will continue in 2021.
Affordability and availability have been driving factors of this new trend. Another new trend due to affordability, supporting the lowrise markets, has been multiple families purchasing together, sharing the costs and residing in one home.

The luxury market will remain strong, with an influx of international buyers and empty nesters relocating. There has been a great demand from people wanting to relocate to Canada, as our country has officially become the most desirable place to live in the world based on Google search data, topping 30 other countries. It is the second-best country in the world to live, and number one for the best quality of life, according to U.S. News & World Report, for the past five years.

Affordable condominiums with flexible and stretched out deposit structures are now being designed with thoughtfully curated outdoor amenities, more spacious suites with workspaces, and large balconies and terraces. First-time homebuyers can get into the market now, taking advantage of historically low interest rates. These rates are here to stay for the foreseeable future, and will further assist economic growth.

Getting all Canadians vaccinated will only boost homebuyers’ already high confidence, and the federal government’s plan to increase immigration will further propel the housing industry. Canada will welcome more than 1.2 million immigrants over the next three years, accepting 401,000 new permanent residents in 2021, 411,000 in 2022 and an additional 421,000 in 2023.

These factors are all conducive to creating another flourishing year for real estate in 2021.

Kim Kopyl
Vice-President, Sales & Marketing
Elite Developments
elitemdgroup.com

Excited for 2021
We had a strong 2020, so I’m excited for 2021. Our construction team was busy in 2020, and we are excited to have three projects taking occupancy in Toronto, Etobicoke and Mississauga.

We have seen a greater demand for more family-size condominiums from new sales and existing purchasers upsizing their initial purchases. The main factors driving this new trend is working from home, competitive single-family housing market and low interest rates.
For the same reasons, investors are still seeing pre-construction condominiums as a solid investment vehicle.

Once it is safe to do so, immigration and international students will play an instant role in a stronger rental market.

Anson Kwok
Vice-President, Sales & Marketing
Pinnacle International
pinnacleinternational.ca

Growing demand
The residential market for lowrise homes and smaller apartment condominium blocks will remain strong in 2021, and in fact demand will grow because of a low interest rate environment and issues related to COVID-19. Many people want more space and are working from home, and they don’t mind driving further to smaller communities where cost of housing is lower.

Even after COVID is gone, hopefully soon, working from home may become permanent for a lot of people. The community, nature, environment and good quality houses will become more important than the distance to GTA. Also, many are choosing to live away from the hustle and bustle of the GTA, which for some has become unaffordable.

Although the market will be strong, we will need to be acutely aware of precautions for staff and trades due to COVID-19. In addition, we will need to monitor cost of materials and labour, as we have already seen increases in lumber pricing recently.

Shaun Levy
Vice-President, Finance & Operations
Flato Developments
flatogroup.com

Faith and confidence
Despite the challenges COVID-19 posed in 2020, we had a surprisingly successful year in new home real estate, especially lowrise. In the fall, we saw the strongest September for lowrise sales since 2003. October and November sales were up 44 and 68 per cent, respectively, over those same months from the previous year.

We now have a COVID vaccine, and remarkably low interest rates are expected to continue for the foreseeable future, fuelling an even stronger year ahead.

We’ll launch sales for the second phase at NAO Towns in Markham during the first quarter of the year, and I have so much faith in our housing market that we’ll bring several other communities to market after that.

Julian Uccello
Vice-President of Operations
StateView Homes
stateviewhomes.com