Only months after finding itself firmly in seller’s territory, the Toronto housing market has shifted abruptly back into balanced market conditions.
The downshift isn’t so surprising in and of itself, considering the turbulence that the market has experienced since the pandemic gained a foothold in Canada in March.
But what’s caught the eye of researchers at Ryerson University’s Centre for Urban Research (CUR) is the fact that, from a broader perspective, the Canadian housing market has so far remained in seller’s territory despite the pandemic.
Housing Market News Alerts
Sign up for news alerts on the Toronto housing market
It’s the Toronto housing market that has, as the CUR team put it, become “more symptomatic than the rest” of Canada.
A standard measure of where a housing market stands in relation to buyer’s, seller’s or balanced territory is the sales-to-new listings ratio. Typically, sales-to-new listings ratios between 40 to 60 percent reflect a balanced market, according to the Canadian Real Estate Association (CREA). A ratio below that range indicates a market favours buyers and anything above that range benefits sellers, who can raise prices as homebuyers compete over a limited number of listings.
According to CREA data, the Toronto housing market found itself comfortably in seller’s territory at the end of 2019, with the sales-to-new listings ratio measuring in at 70 percent. Essentially, this means that 7 out of 10 new homes listed on the market would sell within a month.
As the CUR team pointed out in its May 22nd GTA Housing Pulse, the Toronto region’s ratio fell to 50 percent in the most recent market data available from CREA. However, countrywide, the ratio is still above 60 percent, signalling tighter market conditions, according to CUR.
CUR researchers also highlighted other market metrics where Toronto’s market has been seemingly hit harder by the pandemic’s impact than the Canadian average. Home prices, for instance, rose 2.4 percent year-over-year in Canada in April but only 0.1 percent in Toronto during the same period. Home sales were also down 67 percent in the Toronto region in April, while the Canadian average decline was 55.6 percent.
The key to understanding why the Toronto housing market appears to be more severely affected than the rest of the country lies in the temperature of the market before the pandemic hit.
“The GTA is coming off extraordinarily hot market conditions, while the conditions in the rest of Canada (especially Vancouver) had been more moderate leading up to the pandemic,” wrote the CUR team.
The research group also identified Airbnb units as a contributor to the market’s newfound balance.
“One explanation for the stronger profile for listings in the GTA relative to the rest of the country may be the new Airbnb rules set by the City of Toronto that ban short-term rental companies from marketing on the Airbnb platform. Many of these units may be popping up on the resale market,” CUR wrote.
Toronto has historically been home to an outsized number of Canada’s Airbnb short term rental units due to its popularity as a tourist and business travel destination. With rental income drying up, the units’ investor owners may be forced to sell.