What to expect in the 2021 new housing market
January 27, 2021
Last year was certainly the strangest and most challenging of my life. Like most of you, I spent a lot more time at home. Because we were staring at the same space more frequently, my wife and I got the itch to make some changes. We purchased a new couch, and for the first time in more than 10 years, I bought a new TV.
If the housing data is any indication, there were a lot of people in the GTA in late 2020 making much bigger investments in their living situation than their seating and entertainment options. New single-family home sales surged over the last six months, and the latest data from the Building Industry and Land Development Association (BILD) noted that detached, linked and semi-detached houses recorded 1,914 sales in November 2020 (according to Altus Group, BILD’s official source for new home market intelligence). These figures for the GTA were up 68 per cent from November 2019 and 58 per cent compared to the 10-year average.
In the resale market, the GTA figures were very strong, too, with single-detached transactions rising 30 per cent annually, semi-detached sales up 34 per cent and townhouse sales 31 per cent, according to the Toronto Regional Real Estate Board (TRREB).
Who could have possibly forecast this type of massive growth during a global pandemic? Along with my co-host Steve Cameron, I interviewed Canada Mortgage and Housing Corp.’s local market analyst on our Toronto Under Construction podcast early in the pandemic. Dana Senagama discussed CMHC’s forecast that called for a decline in house prices both nationally and in the GTA over the following 18 months. That period is not over yet, but I think that prediction is going to be very wrong. Pricing for single-family properties have skyrocketed, with the average price in the GTA up 16 per cent to $1.27 million, per Altus, with TRREB showing single-detached resale pricing increasing to $1.20 million – a 15-per-cent annual jump.
It’s clear that many people with the financial ability to move were doing so in 2020. Some buyers wanted larger homes so they could stretch out, others wanted properties with ample outdoor space, while another popular feature was home offices. Cottages and rural properties became very popular as second home destinations for people looking to escape the density of the city.
The one section of the market that wasn’t red hot was condominiums. New condo sales were respectable, but high-priced downtown properties experienced slower absorption, as rental rates have tumbled (down 20 per cent annually in Toronto, as per the latest report from rentals.ca and Bullpen Consulting). Resale condo transactions were up seven per cent annually in November 2020, but prices fell into negative territory, dropping two per cent year-over-year in the GTA.
The reasons for the condo decline are well documented – less tourism caused many owners of short-term rentals to sell, immigration has plummeted, international student populations are way down, fewer recent graduates are starting work in the downtown towers, and many professional couples have accelerated their “move-up” timeline and purchased a single-family home outside Toronto. Another factor is people just don’t want to be in elevators with others right now.
However, at what point do young folks who felt they were priced out of Toronto forever take advantage of the lower prices and rock-bottom interest rates and buy in the core? How fast do the vaccinations occur and COVID numbers drop, prompting employers to bring their workers back to the office? How quickly do Ryerson, U of T, George Brown and other colleges and universities pack lecture halls again? When do investors decide pricing has hit bottom and try to swoop in to get the best deals before the market shoots up again?
These are all tough questions to answer. My expectations are that the rapid growth in the single-family sector will tail off, the market will remain strong, but don’t expect another year of double-digit price growth in the new and resale markets. New and resale condos will likely be weak for the first three to four months of the year, but start to pick up steam in the late spring and summer. There will be a number of successful new condo launches in the fall of 2021, as consumer confidence returns and price growth is reported in the resale market.
Before buying your next property, do a lot of research and surround yourself with a quality team, including an experienced real estate agent and mortgage broker. Good luck!
About Ben Myers
Ben Myers is President of Bullpen Research & Consulting, a boutique real estate advisory firm, that works with landowners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at bullpenconsulting.ca