With second vaccine doses rolling out quickly and the next stage of Ontario’s reopening plan imminent, a return to normal life appears to be within reach. The same can also be for Toronto’s housing market, which has undergone tremendous change over these past 15 months.
After a period of sales centre closures, construction disruptions and appointment-only showings, the industry is now gradually returning to its pre-pandemic state in many ways. When Ontario reaches Stage Three of its three-part reopening plan — likely in a matter of weeks — real estate open houses will be permitted to resume, signalling a more permanent reinstatement of industry standard practices.
As we creep closer to a new normal, it’s worth considering which trends that emerged or accelerated during COVID-19 will linger and which will fade away, ultimately shaping Toronto’s post-pandemic market for years to come.
More real estate tech will become commonplace
With social distancing rules heavily restricting face-to-face interactions, agents and their clients were forced to move their transactions into the digital realm during the pandemic. Oftentimes, this meant signing purchase agreements over Zoom while using DocuSign, or touring homes via live video streams.
Reuven Gorsht, co-founder and CEO of Deeded, explains that the real estate industry has always had many advanced technologies at its fingertips, but when given a choice, some consumers would still tend to stick to their non-tech-enabled habits. After going through a period of pandemic-induced change, Gorsht says that there’s been a huge acceleration in the adoption of these technologies as the industry was left with no other choices.
“A lot of it is really consumers and industry professionals taking a dive into the deep end and realizing, ‘Hey, it’s not that bad. In fact, it’s actually a lot more convenient to do business this way,’” said Gorsht.
“Over time, I think a lot of those technologies and a lot of those practices that are driven by some of those technologies are here to stay and they’re going to forever transform the way that people are buying and selling homes,” he added.
Deeded is a technology-driven platform that allows clients to securely close mortgage and real estate transactions virtually. Since the start of the pandemic, the company has expanded from Ontario into more provinces and grown its headcount as consumer demand for a more convenient and digitized closing process has grown.
With many consumers having experienced the convenience of a digital closing process over the past 15 months, Gorsht anticipates that it will be unlikely that some consumers will return to pre-pandemic processes. He compared this scenario to using Uber versus hailing a taxi in the traditional sense — once you’ve experienced the convenience of the technology, you won’t go back to the old ways unless you have to.
“I only see things accelerating because once you’ve set the bar for new standards that offer convenience, like stability to the consumer, they’ll only stick around,” said Gorsht.
The desire for city-living will take off again and stay strong
During the first set of lockdowns, Toronto’s typically lively downtown seemed virtually empty with its vacant office towers and temporarily closed restaurants and nightlife venues. Now as we look at the reopening process, it’s clear that the craving for urban life is making a strong comeback.
“I think the cities are just going to explode back with activity once this whole thing is over,” said Ben Myers, President and Owner of Bullpen Research & Consulting Inc.
Myers points to rental prices, which have started to rise recently across Canada amidst growing demand from tenants who anticipate returning to offices. Myers doesn’t expect a significant market resurgence until the fall, but is forecasting Toronto region rents to rise between 12 and 14 percent in 2022.
Looking at demographics, Myers expects younger individuals will flock to cities seeking out the career and amenity advantages that urban communities tend to offer, features that are not as plentiful in suburban areas.
“People have been talking about cities dying forever after 9/11 and after wars and all of those things, but they always come roaring back,” explained Myers. “So I’m pretty confident the same thing will happen in Toronto and Vancouver and Montreal and all of those places.”
Diana Petramala, Senior Economist at the Centre for Urban Research and Land Development (CUR) at Ryerson University, pointed to recent CUR research that shows Toronto is the second-fastest growing city in the United States and Canada, behind Phoenix, Arizona.
Prior to the pandemic, Petramala explains that Millennials were already moving out of city centres as they aged into family-rearing years and went looking for more affordable, family-friendly housing elsewhere. Regardless of this long-term trend, Petramala notes that there is another big generation coming in behind Millennials that will lead to a revitalization of Toronto’s downtown core.
Part of this revitalization can also be attributed to buyers who moved during the pandemic and did not factor in the length of their commute, says Petramala. Post-pandemic, people will become more willing to live in smaller spaces again to take advantage of shorter commute times to offices and amenities.
“When you’re not thinking about COVID anymore, you might actually price in a commute,” said Petramala. “And so, people are willing to take smaller housing for lower commutes, or a less strenuous commute. So when people start pricing in the commute, there might be more ‘I’ll take smaller [living spaces].’”
You’ll see new amenities and housing types
Although reopening is underway, it’s likely that many of us will continue to work remotely in the near-term with numerous employers adopting a hybrid model for their team members in the long-term. Already, new home developers are taking note of this, and are examining various options to accommodate the post-pandemic needs of their residents within their projects.
In his consultations with developer clients, Myers says that he is making recommendations to include designated spaces or cubicles where people can quietly work outside of their suite. Other suggestions that are under consideration by developers include technology-equipped Zoom rooms for video conferencing and strategies to accommodate packages now that online shopping has become increasingly popular.
“I think developers are constantly re-assessing their amenity packages and what is appropriate for the times,” explained Myers. “And obviously it is extremely difficult, because many of these projects take three to four years to build, so the market can change pretty quickly in that time.”
As the rental market continues to recover from pandemic price lows, considerations are also being made for purpose-built rental housing. While relatively few developers are building it now, Myers says that there are a lot of builders looking into it. Private developers that have primarily built condos in the past and have institutional capital are trying to understand the options around owning rental assets, he adds.
Petramala notes that developers tend to scale down their development choices based on how home prices are rising. In the 2008 financial crisis, for example, prices fell and a lot of projects were converted into townhomes, Petramala explains. As the type of built forms that we see are a reflection of home prices, future trends may determine the size and scope of new projects.
“If home prices are accelerating quickly as they have been over the last few years, developers are going to want to build more and higher, and if prices start to stabilize and demand stabilizes, that might start to encourage more low-rise development,” said Petramala.
