Toronto Is Now A Buyers' Market Due to COVID-19

Friday Aug 07th, 2020

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Given a good start to the Greater Toronto Area (GTA) spring housing market in February, changing conditions around the COVID-19 pandemic have had a significant effect on the region's housing operation. Among a series of policies being introduced at all three levels of government – including a range of programs to help homeowners and tenants in the area - Ontario declared a state of emergency across the province on March 17 to help contain and minimize the spread of the virus. 

As a result, housing market activity began to slow in response to these rising steps, and buyers and sellers started holding off on home sales and acquisitions amid uncertain economic and health conditions. Using data from the Toronto Regional Real Estate Board (TRREB), here is the analysis of how immovable market activity progressed in conjunction with the introduction of these emergency measures.

According to our estimates, between March 17-23, the sales-to-new listing ratio (SNLR) – a market competition metric determined by dividing the number of sales by the number of new listings – fell to 38% for detached and semi-detached homes in the GTA, compared to 53% for the week before the emergency declaration. The SNLR fell from 55 percent for condo apartments and condo townhouses to 40 percent for the same period. When the SNLR is between 40% – 60%, this implies a balanced market, whereas above and below that threshold, respectively, show the demands of sellers and buyers. As such, those figures reflect a noticeable change over a short period in market conditions.

Here's a closer look at how the dynamics on the GTA market progressed as we hit our third week under an emergency in Ontario.

One Week After: GTA House Market is now a Buyers' Market

With increased social distance steps in effect after the state of emergency declaration, the result was a 14% decrease in new listings for detached and semi-detached houses between March 17-23 compared to a week earlier. Sales were down 38 percent on a week-by-week basis from 1,203 to 748 sales.

We saw a similar phenomenon unfolding in the condo market with fewer sales and listings, which was enough to nudge the market somewhat closer to business conditions for buyers. For the week following the announcement, sales decreased by 35% over the same duration from 724 to 482, with 10% lower listings for condo apartments and townhouses compared to the previous week, down from 1,312 as per the listing entry date.

Two Weeks After: GTA Condo Market Borders on Being a Buyers' Market

Although the real estate dynamics suggest that housing demand in major urban centers such as Toronto will bounce back in the long term, COVID-19 has triggered an unprecedented downturn in housing market development, and more generally, across the economy. Just two weeks after the declaration of a state of emergency, the GTA's house and condo market have had a clearly noticeable impact.

More persuasive health advisories, combined with recommendations to avoid all in-person encounters between real estate agencies, including the Ontario Real Estate Association, facilitated a 53% decrease in detached and semi-detached sales between March 17-30. During that time, there were 1,153 sales, compared with 2,435 between March 3-16. New listings dipped between 4,503 and 3,140, representing a 30 percent drop.

Sales in the condo market plunged a staggering 53 percent from 1,541 to 729, and new listings fell 26 percent from 2,490 in the week of March 3-16 to 1,842 in the two weeks following the announcement. This was a rapid change from the market conditions of sellers between 3 and 16 March, when the SNLR was 62%, to market conditions that bordered those of a buyer's market only two weeks later.

Methodology

New listings and sales data from the Toronto Regional Real Estate Board (TRREB) were created for the Greater Toronto Area on March 31, 2020. The Greater Toronto Area encompasses the Durham Region, the Peel Region, the Halton Region, the York Region, and the Toronto Region. Sales are based on the date of purchase of the properties; there could be a slight lag period between selling a home and updating the transaction in the TRREB system.

The sales-to-new-listing ratio (SNLR) is measured as new listings divided sales. A percentage below 40 percent indicates that few homes have been sold relative to those recently listed (a buyer's market). In contrast, a rate above 60 percent means that many homes have been sold relative to the newly listed amount (a seller's market).

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