Blog Entry: January 09, 2021

2021 Market Predictions

2020 was quite the year. Will it be the same in the new year or will things be different. Lets take a look at few of the factors that will affect the market this year. While I’m no expert in predicting the future, the following are my Toronto area real estate predictions for 2021.

1. The Pandemic

The way I see it majority of people’s housing decisions were and will be dependent on the way the pandemic unfolds. As of this writing, a record number of 4,249 cases were recorded this past Friday. Schools have been extended until Jan.25. And return to work for most employees does not appear to be anytime soon.

This will have a major impact on how and what people will buy. Working from home would mean a preference for more space, typically in the relatively more affordable suburbs of the GTA. This would definitely put upward price pressure on single family homes which were already on fire last year. A lot still remains to be seen, the success of the vaccine rollout, how the vaccine deals with new strains of the virus and how companies and businesses will view working from home post pandemic.

2. Interest Rates

With the recent drop in interest rates, mortgage payments for a given amount are the lowest they have ever been. There is also the Fear of missing out on these low rates, and there would be buyers looking to lock in these rates. Those who locked in higher rates a year or two ago are also looking to capitalize on this.
The Bank of Canada forecast that the rates will not rise until 2023 or at least until economic recovery is well underway. The Big Five banks are all offer a “posted rate” of just below 2% for 5 Year Fixed Mortgages while the actual rate is more like 1.79%.  The second tier lenders and credit unions (for e.g. HSBC) are offering even lower rates.


3. The Condo Situation

While prices in for single family homes in the GTA have been on fire, Condos in the downtown core have gone down in price. The average price for a condo in Dec 2020 was around 625k down from 640k in Nov 2020. While the trend is downwards, there have held surprisingly well. Keep in mind that prices hit a all time high pre-pandemic. Looking at the average price for the 416 area, prices have probably dropped around 10% from all time high in February 2020. Given the fact that people are working from home, businesses and activity shutting down, less students, less immigration this could have been much worse. Bigger and Luxury style condos don’t seem to be doing as badly.

Its not all bad news, the current conditions present an opportunity for first time home buyers to get into the market, low interest rates and an abundance of inventory mean more options to choose from and less bidding wars. The crazy price increases that detached GTA homes experienced in the second half of 2020 would also mean that more and more people are getting priced out of these homes, which would put put pressure back on bigger condo units. This may be a good window for those looking to get into the market and those who are investing.

4. Single Family Homes

Single family homes will still be red hot and based on what I have seen everything seems to point towards a hot spring market. Place like Durham region has seen prices increase of between 20-30% in the last year alone. While Durham has been historically cheaper than the rest of the GTA, things are changing real fast. I personally do not think this kind of growth is sustainable and we will most likely see a peak later this year. But in the meantime it will still be low inventory, high demand and multiple offers.