Toronto home prices could still increase this year, despite pandemic fears

Royal LePage is predicting that Toronto area home prices could still rise this year, despite the COVID-19 crisis.

In its first-quarter report, released Tuesday, the brokerage says that if the pandemic recedes by the end of second quarter, prices could jump up 1.5 per cent year-over-year, to $856,263 by the end of 2020.

However, if the lockdown continues to the end of August, the company expects house and condo prices will contract by 0.5 per cent year-over-year to $851,982.

Although Toronto’s housing market had a strong first-quarter, with aggregate resale prices rising 7.5 per cent year-over-year, that won’t be enough to compensate for the loss of eight to 12 weeks in the busy spring real estate season, said Royal LePage CEO Phil Soper.

About 22 per cent of sales typically occur in the first quarter of the year.

“We’re not anticipating an immediate recovery,” he said.

Even when the economy begins to move again, people will still be wary of each other and sellers will be more hesitant to allow strangers to tour their homes.

But once consumers feel more comfortable, Soper said economic stimulus, such as low interest rates, competition among lenders and softer prices, will kick-start the market.

The “swift and violent” impacts of COVID-19 have disproportionately hit younger and part-time workers across the province, groups less likely to be in the housing market, he said.

That’s why the real estate sector will be one of the prime lifters of the economy when health protocols are relaxed, just as it was following the global downturn in 2008 and 2009, said Soper.

“It was really the entry of the first-time buyer and the housing consumer that brought the Canadian economy back after the great recession,” he said.

Soper said it may appear as if real estate prices have plummeted when the country goes back to work. There will be headlines touting dramatically lower selling prices. But those will likely be a few distressed sellers accepting lower prices that lower the overall average.

There will also be some opportunities for buyers who might otherwise have been faced with competitive offers — something that was a growing concern in the heated market of the first part of the year.

“One of the really challenging things we saw coming in 2020 before the health crisis, was the psychology of multiple defeats where you put an offer in and you lose and you lose and you lose. Eventually people either drop out (of the market) in frustration or they overpay. We should see a lot less of that,” he said.

The Toronto Regional Real Estate Board (TRREB) had been forecasting a 10 per cent rise in GTA housing prices this year before the COVID-19 restrictions stopped showings and stalled all but necessary transactions. The board has suggested that it will have a better idea of where prices and sales are heading later this spring.

Royal LePage’s report says that Toronto’s outlook is relatively optimistic compared to the national picture. It projects that Canadian home prices could grow 1 per cent if the economy starts churning again by the end of June.

But if business is locked down through the summer, housing will likely contract about 3 per cent.