2020 Real Estate Market: The first quarter of 2020 saw price growth across the GTA approaching a 10% year over year increase – that of course has been put on hold. Not surprisingly, both buyers and sellers have reacted to the uncertainty of COVID-19, resulting in a balanced pause. The impact on pricing has been muted, for now. If relief efforts are effective in keeping small businesses and their employees above water until things stabilize, we may see a moderate softening, followed by a steady recovery through Q3 and Q4 as confidence slowly returns. However, if self-isolation measures and the closure of non-essential businesses continue into the late summer, consequently inflating unemployment and applying pressure to household budgets – we could see an uptick in mortgage defaults and forced selling. If this new inventory is met by a crowd of nervous, skeptical buyers, property values will be pushed lower as those who must exit the market make concessions in order to do so. Ideally, the city returns to a state of COVID-adjusted normalcy before the end of the second quarter resulting in sideways growth for the remainder of the year. If this extends into and beyond the third quarter, we anticipate a modest (1-3%) decline in property values and a prolonged horizon for recovery into the first half of 2021.
Leasing: As expected, we’ve seen a noticeable slowdown in our leasing due to COVID-19. Many of our tenants have understandably refused to allow showings due to fear of contamination, resulting in us being able to market and lease only vacant suites across our portfolio. We’ve also noticed increased resistance to higher lease rates. Early numbers for March point to a modest decrease in the average lease rate for condo apartments of approximately 2.2%. While we do feel that accurate pricing is necessary to avoid vacancy loss, we are not predicting a severe correction. In the second half of 2020 we may see upward pressure on our historically low vacancy rate as we move through the aftershocks of the pandemic and inventory begins to flood the market resulting in a temporary decline in average lease rate of around 3-5%. If your unit is heading toward vacancy, it may be prudent to invest some time and resources into improving the property, allowing it to stand out from the crowd when the crowd inevitably swells prior to re-stabilization.
If you are considering a real estate transaction in this environment – it’s incredibly important that we formulate an effective and thoughtful strategy. We remain available to you should the need arise.
Many of you have contacted us with feedback and encouragement and we are incredibly grateful for the support. In these unprecedented and uncertain times, it’s easy to feel overwhelmed. We hope that you find comfort in remembering that we are all facing these new challenges together. Over the next few months, we will continue to strategize and communicate with you and your tenants to safeguard your real estate investments.
It is my sincere hope that you and your loved ones stay healthy and safe. We thank you for your continued trust and support. As always, we remain here to help.