Economic Outlook – COVID-19 & Toronto Real Estate
There has been much speculation about the direction of the Toronto real estate market amid the COVID -19 pandemic. Benjamin Tal, Deputy Chief Economist with CIBC Capital Markets, recently spoke to Toronto Real Estate Board members about the economic impact of the pandemic, and its consequences for real estate.
Some important points made by Tal included:
- We are not in a recession, or a depression. Instead, we are in a “frozen economy”. Many jobs that were lost will likely be recovered.
- There is not going to be a free fall in the market, but a “softening” of the market. This means less competition for buyers, and less offers for sellers. In other words, a removal of the tightness in the market.
- Prices may remain relatively stable between now and 2022, when pent up demand may cause a strong market and an increase in prices once again.
- The rental market will slow down, and vacancy rates will increase. Causes could include the reduction of immigration and the influx of units available for long-term rent as a result of a stale short-term rental market.
- De-urbanization (the desire for people to want to leave condensed urban living) is not expected to be a long term consequence of the virus.
- This crisis has an end game – treatment or a vaccine – but we must be careful not to make long term predictions.