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It’s safe to say that we are living in unprecedented times. Science fiction, anybody?
The implications of current events and speculation on where we’re headed have a lot of people thinking about the worst-case scenario. Economists agree, however, that a recession is not inevitable. What we are experiencing today is nothing like the crisis we saw in 2008. As the current situation is caused by external factors (as opposed to generalized economic insecurity), there is no reason to think we are headed in that direction.
Need more data? Here are 6 good reasons why the coronavirus will not topple the Toronto housing market:
Lack of Inventory
The demand for housing has not changed. If we look at historical data from past economic crises, it stands to increase. With Toronto’s high demand, low inventory, and dropping interest rates, we expect the competitive climate to hold for all types of properties in just about every neighborhood. The Toronto Real Estate Board reported a significant increase in sales, both month-over-month and year-over-year. Coupled with a drop in active listings, this leads to brisk competition for available properties, which are already hard to come by.
People Need to Live Somewhere
Everybody needs a place to live. Now, more than ever, people appreciate the value of a safe haven. Homeownership supports feelings of security and stability, an ideal that will figure prominently in our plans going forward.
Low Mortgage Rates
Already low mortgage rates were further slashed by several Canadian banks, following the Bank of Canada’s move to drop its key rate to .75 percent. What this means is that buyers can access mortgages at 2.95 percent, a significantly lower point of entry that will likely fuel the competition.
Since the economy is strong and has been building strength for some years now, home equity, in general, is high, consumer credit is low, and people have more disposable income, according to the Bank of Canada. More equity gives homeowners more leeway in these uncertain times, meaning it is unlikely we will see a selloff or similar response based on current conditions.
Home Values are Rising
As inventory shrinks and listings decrease in the Toronto real estate market, home values continue to rise in value. At the start of the year, we saw a jump in selling prices of more than 12 percent, leaving us with an average selling price of $839,363, a number that is expected to climb over $900,000 by the end of 2020. The demand is highest for detached homes, and Bloomberg predicts an “action-packed” year for the Canadian housing market if rate-cutting trends continue.
Real Estate is a Sound Investment
While people who have invested heavily in the stock market will likely have to wait a while before things return to a predictable status quo, real estate is still a sound investment.
If you would like to learn more about how current conditions are likely to affect the Toronto housing market, reach out today. We would love to speak to you about how we can help.