The Toronto region’s real estate market has been left struggling to recover after the initial shock it experienced as the COVID-19 pandemic spread across the country in March and April.
Some housing types and areas of the Toronto region, however, will fare better than others in the long road to recouping the losses suffered through the spring.
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With its reliance on strong annual immigration and significant new supply currently under construction, it’s the City of Toronto’s once seemingly unshakeable condo market that will have the steepest hill to climb to recovery, according to researchers at Ryerson University’s Centre for Urban Research (CUR).
Researchers Diana Petramala and Hannah Chan Smyth wrote this week that they expect the Toronto condo market to “bear the brunt of the [housing] weakness for the rest of 2020.”
Exploring the reasons behind the market’s anticipated underperformance, Petramala and Smyth first noted that recently published home price data from the Toronto Regional Real Estate Board (TRREB) showed that the city’s resale market saw weaker price increases than the 905 suburban region in May. This was attributable to weakness in Toronto’s condo market segment, the researchers said.
They went on to point out that the region’s rental market, which is heavily concentrated in the City of Toronto, will be hit hard by a steep decline in immigration and substantial job losses that have already occurred.
Toronto’s strong population growth is driven by immigration. Petramala and Smyth cited a recent RBC report that assessed COVID-19’s impact on immigration and showed that Toronto’s population would actually be in decline without support from immigrants moving to the city. The RBC report estimated that immigration will be halved in 2020, and without this growth driver, demand for rental housing will be significantly affected.
Since investor-owned condos play a major role in supplying the rental market, it’s inevitable that Toronto’s condo market will be impacted by the sharp drop in newcomers arriving to the city in 2020.
The market impact of stalled immigration and the already apparent underperformance in resale condo prices will likely be exacerbated by the large number of condos currently under construction in the city.
According to the CUR researchers, there are 51,600 condo units currently under construction in the City of Toronto. While not all of those units will be completed this year, there will still be significant new supply coming online at a time when demand has taken a hit and some investors may be stepping to the sidelines or attempting to offload their own units.