– Market Analysis Housing Starts to Rebound in 2021Total housing starts are likely to drop in 2020 before rebounding next year. Strong pre-construction sales across the Toronto CMA (particularly from mid-2019 onwards where typically over 80% of units are sold) owing to a more robust and diverse economy, will ensure that Toronto’s recovery will be slightly stronger than that of the rest of Ontario in 2021 and 2022.
Supply chain disruptions due to border closures and global lockdowns will curtail some starts activity throughout 2020. Moreover, labour shortages resulting from the pandemic (particularly if construction sites employ temporary foreign workers) will curtail some starts activity this year.
Resale sales and price to rebound in 2022Home sales in the Greater Toronto Area (GTA) will decline for the rest of this year, and then start to recover by 2021 Q1 and show growth throughout 2022. A labour market with a heavy concentration of “office-based” companies will enable a greater number of employees to work remotely in the event that the pandemic drags on (and prolongs lockdowns) possibly ensuring business continuity and minimal interruption to receiving income.Short-term job losses will occur primarily in the retail and hospitality industries, which typically employ lower paid workers. Based on their average income level, these groups are more likely to rent than own.
Therefore, the negative impact to the homeownership market will likely be less severe but with a downside risk that sales will not return to pre-COVID levels in the forecast period.Average house prices were on an upward trajectory during the time period leading up to the provincial lockdown in mid-March. They will decline throughout the remainder of this year and into 2021.
Homeowners, particularly those owning ground-oriented homes (single and semi-detached and townhomes), will choose to keep listings off the market to wait and see how market conditions develop. Lower mortgage rates, mortgage deferrals and fiscal stimulus packages will likely ensure that many homeowners are able to meet their monthly mortgage payments and thus remain in the homeownership market. However, anticipated increases in the supply of condominium apartments will lead to softening prices next year. Increased listings because of moderating short-term rental demand (due to both regulatory and pandemic effects on short-term rentals) will force some investors to list their units up for sale. More units could also sit on the market longer as more buyers wait on the sidelines due to loss of jobs/income and wanted assistance in 2021. A significant number of condominium units under construction (54,000 units currently) will make its way to the resale pool and will further increase supply.
The upside risk to the forecast is a milder price correction with sustained resilience in the ground-oriented home market (detached and townhomes) and persistent demand for more affordable condominium apartment units.The downside risk to the forecast is a more severe and prolonged adjustment to the pandemic that will have far reaching economic consequences.
Vacancy rate and rent growth to ease Anticipated increases in supply, in terms of higher completions in primary rental units and more rental condominium apartments entering the secondary market should ease rent growth and vacancy rates in a historically tight rental market.
Short-term job losses, which will likely persist mainly in the service and hospitality industries and typically employ lower-salaried workers, are more likely to affect renters. An uncertain job market will likely affect millennials that are looking to enter the job market. As a result, they may now delay their entry into the rental market and stay at home with parents and/or choose co-sharing living arrangements, thus reducing demand for rental units. Prolonged effects of the pandemic, such as border and airport closures, will reduce net migration inflows – particularly immigration which has been a key driver of rental demand in the GTA.
https://assets.cmhc-schl.gc.ca/sites/cmhc/data-research/publications-reports/housing-market-outlook/2020/housing-market-outlook-canada-summer-61500-2020-en.pdf?rev=ee98fa7e-3704-4e5f-9c43-95f04113558f
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