Moving forward in a post-COVID world, there are many things that have changed and will have long-lasting effects for months to come. For example, the pandemic meant that people had to spend more time than ever in their homes, and it resulted in 29% of Canadians realizing that they needed more space. In Ontario, and specifically cities like Toronto and Niagara Falls, going into fall 2021, we predict the re-location trend will continue as traditional real estate cycles come back and mortgage rates are expected to stay low. These trends, coupled with an uptick in rental demands and the anticipation that average sale prices may increase, means that right now might be the perfect time to move into a new home or rental unit. This article will discuss 5 homebuyer trends you can expect to see in fall 2021 and what they mean for the housing market as we move past the pandemic and into a new age of home buying for Ontarians.
Re-location Trend to Continue
When the pandemic hit in early 2020, around 41% of Ontario workers were forced to move to remote working environments. With people working from home, they were restricted to spending more time in their homes than ever, and this resulted in many people questioning if their living situation was best for them anymore.
Now, moving into fall 2021, we anticipate the re-location trend to continue throughout Ontario. For one, it is expected that many jobs will continue to be completed through remote working environments. Being able to complete the same job remotely means that we are seeing a shift from urban to rural or suburban living for many buyers.
For those who love living in cities, many are also experiencing a shift in their needs post-pandemic. People are choosing where they want to move to based on local livability factors such as bigger houses, larger yards, better neighborhoods, and closer proximity to things like parks and schools. Therefore, moving into fall 2021, the re-location trend is expected to continue as people move to meet their changing needs.
Traditional Real Estate Cycles Coming Back
Moving into fall 2021, we expect to see traditional real estate cycles come back. When COVID-19 hit, it was not only a global health crisis but also severely affected the economy and disrupted the normal real estate cycle. As a result, real estate agencies shifted to virtual models to stay safe while continuing to provide services; nevertheless, it wasn’t until restrictions started to lift in early summer 2020, coupled with pent-up demand, that resulted in what many describe as a ‘delayed spring market’ effect. This ‘delayed spring market’ effect resulted in record-breaking numbers for the remainder of 2020.
However, around the end of 2020 came another lockdown, which, of course, affected the real estate market once again. Fast forward to early July 2021, and more than 78% of adults in Ontario have received at least one dose of the vaccine. Finally, with restrictions lifting, the vaccine being widely available, companies opening for business again, and more market stability than before, we are seeing real estate cycles go back to normal.
An Uptick in Rental Demands
In October 2020, amidst the pandemic, 2.8% of rentals in Toronto were vacant compared to a vacancy rate of just 0.7% in the same market the previous year. The high rate of vacancy in condo-dense markets in Ontario can be equated to the widespread closure of workplaces, universities, and the Canadian border to tourism and immigration.
The fact that rental vacancies are so high means that it will be more of a buyer’s market for rentals, at least in these condo-dense cities. With vaccines becoming more widespread, universities slotted to resume in the fall, and Canadian borders planning to re-open soon, regular day-to-day affairs, as well as tourist and immigration trends, are expected to resume in Ontario. Therefore, shifting out of the pandemic and looking forward to fall 2021, we expect an uptick in rental demands as activities revert to a more normal or pre-COVID pace.
Average Sale Price Increases
The pandemic helped people realize what they really want in their next home. Currently, there is a high demand for detached homes, especially for young families looking to have more space, with a bigger yard in a nicer neighborhood. Those looking to upgrade are called move-up buyers. However, that doesn’t mean there is tons of real estate for sale for move-up buyers. Many people were weary of listing their homes during COVID, citing economic uncertainty; however, those who did list their homes only saw them on the market for an average of 15 days in places like Toronto. Since the demand is so high, homes are getting multiple offers, and it could be an ideal seller’s market right now.
Moving into fall 2021, there will still be a high demand and low supply meaning that we expect average sale prices for homes in the Golden Horseshoe to increase between 7-12%. While this is good news for sellers, it might mean that buyers should act fast before sale prices increase and make their dream home out of their budget. Another factor to consider is that with the Canadian borders set to reopen, we will see tourism and immigration increase, introducing even more buyers into the current market.
Mortgage Rates Expected to Stay Low
Although average sale prices are predicted to increase in Ontario, mortgage rates moving forward are expected to remain low. In March 2020, extremely low rates were introduced to calm the markets and entice first-time homebuyers with full-time jobs to purchase a new house. The Bank of Canada wanted to encourage spending and stimulate the economy and has stated that rates will remain low until 2023, when the economy is expected to make a full recovery.
Fixed mortgage rates are at historic lows, sitting right around 1%, and it has created a kind of desperation in young buyers to buy and lock in these low rates. However, with these low rates expected to stay around for at least the next two years, buyers, especially new buyers, do not need to feel rushed to purchase their new home.
The COVID-19 pandemic was not only a major health crisis but also created economic instability and fluctuations in the real estate market, mostly coinciding with the lockdowns. Now, moving into fall 2021, people are getting vaccinated, and businesses are opening back up, meaning that the real estate market too can get back to traditional real estate cycles. Also, larger cities in Ontario that are condo-dense should expect to see an uptick in rental demand as Canadian borders open and travel and immigration resumes.
The long-term effects of the pandemic on the housing market will be seen in years to come. For example, although prices are predicted to increase due to high demand and low supply, mortgage rates are currently set to stay low until 2023. Furthermore, the pandemic allowed people to observe how their home functions and re-evaluate their needs moving forward. In conjunction with low rates, people realizing what they need in a home means that the re-location trend is expected to continue throughout Ontario moving into fall 2021.