At the most recent Christie’s International Real Estate 2020 Luxury Specialist Virtual Conference, Katie was on the panel speaking to over 70+ agents about “City/Suburbs & New Development Market Trends”, providing the attendees with knowledgeable and invaluable information about Toronto insights or the trends in 2020.
We would love to share this information with you too!
Throughout 2020, many cities across the board became hotspots for Covid-19 and some people left the urban lifestyle and relocated to the suburbs. Others remained in the cities re-evaluating their home needs to accommodate homes offices and more space for the family. In a short period of time, the lifestyle that we had become most familiar changed.
Katie, can you explain some of the trends you’ve seen in Toronto in 2020?
Toronto real estate was pretty much locked down in April and the first half of May, but since then sales have been very vibrant and strong. We hit record sales figures for the months of August, September and October which means that lots of people are wanting to find solutions to their Covid housing challenges.
Also, because there aren’t any grad trips to Europe, Asia or the US, and kids weren’t at overnight camps (a very big thing up here) families that have been financially unaffected by Covid have money burning holes in their pockets. Bank of Canada analytics say that bank savings are up across all socioeconomic levels.
Trend wise, we have people who are staying in the City but need space inside and out. There are also many people leaving the City altogether, or buying second properties in what were traditionally vacation areas about two hours from downtown. The final group we have been working with are people re-prioritizing their real estate in general, selling multiple properties to consolidate in a home that suits the new reality better.
What trends are you seeing for those who have decided to stay in the City?
People in the city want space that will make it easier and more comfortable to deal with working from home and having kids home more because of abridged or online school days . Families in 1800 sq ft “starter homes” are desperate for home offices and space where everyone can have a “zone”. Luxury new builds (around 4500 sq ft) have at least an office if not an office and a library, all have home gyms.
Clients who at one time chose downtown living for the vibrant cosmopolitan lifestyle and the ability to travel don’t have that anymore. There isn’t dining out two or three times a week, nor is there theatre, the ballet, opera or any of our local festivals. So why live in a box where your cats have a “Catio” on your balcony?
I sold one condo for exactly that profile in July. She had bought a fabulous 790 sq ft condo in the heart of downtown when she sold her business in her early 50s. Her intention was to have a pied-a-terre in the city with access to all the city night life but where she could walk away if she wanted to spend 2, 3, 4 months travelling. She bought a fabulous home a few miles north that has a gorgeous garden, gym, and space for her and her husband. She bought that home the day before it was listed on the MLS and sold her condo the day we listed it as well.
City dwellers moving out of the City to the suburbs? What type of lifestyle towns are they looking to be in?
The affluent money is searching for more space and land about 2 hours from the City as locations that were once only an option for vacation are more and more becoming full time residences with the ability to work remotely.
Prince Edward County is a farming community surrounded by beaches on Lake Ontario about 2 hours east of the city. For the past 10 years the full time resident influx has been people in their 30s who had more job flexibility but as that work model scales to upper level executives, people in their 40s, 50s and 60s are the predominant buyers. Prices have doubled in the County in the past 3 years, and properties that used to take a year or two to sell are now selling in days. The market activity is up 100% from last year.
Collingwood, about 2 hours north of Toronto, is on Georgian Bay (Lake Huron) and was originally a skiing area but has become a 12 month destination that now has golf, as well as a great town. There was a steady trickle of retirees for the past 10 years but that has fundamentally changed and the buying profile is now families looking for space and an escape. The local school boards had to close the schools to any new students in August as the surge of new families meant that they were going to have to put up portables.
The appeal to a town like Collingwood is that it has great access to the City, is only an hour and a half to the international airport, has good hospitals and schooling as well as a growing base of great restaurants and shops while being on Georgian Bay so lots of outdoor activities.
The Muskokas are a series of lakes and primarily three season occupancy. Everything that came to market this summer sold. Trends included many first time buyers, people buying island properties for family “overflow”, upgrading of location or actual cottage. 300 feet of land costs about $3.5 million with the build taking people to $6 or $7 million. There was an absolute rush on these properties. First time cottagers want all the bells and whistles including pools, hundreds of thousands in hard scaping, Sonos systems, lighting systems and glass and stone homes with standing seam steel roofs for the durability. Spec builds that fit that profile all sold.
Are you seeing cross-border movement with Canadians who have been living and working in the US come home with families?
We are seeing a number of Canadians “coming home”; People who have created their careers in the States and are now moving back here with their spouses and children.
Are they looking for housing in the City of suburbs?
Most are coming from cities so wanting to replicate that. We had a listing that we originally brought out in late November 2019 for $4,150,000. We reduced the asking price to $3,995,000 in early February and took it off the market when Covid locked down in March. When the sellers felt comfortable, which was July, we brought it back to the MLS at $3,750,000. It sold in 3 days with 5 offers. The winning offer was a couple moving “home” from NYC with their young daughter.
Are you seeing International Buyers?
Our international buyers are definitely down. Currently, Canada has strict limitations in place for foreigh travellers, with only those who have been granted permanent residency and have a job in place allowed to come in. This restricts the foreign buyers who could come in on tourist visas and then invest in a home, they can’t just land and buy a “safe haven”.
While the Toronto Regional Real Estate Board doesn’t collect statistics on the originating home for buyers, we are a country reliant on immigration to drive our economic growth as compensation for an aging population and low birth rate.
From April – June this year Canada welcomed 34,000 new permanent residents which is down from 94,000 for the same period last year. That’s a decline of 64%. More than half of the new Canadians settle in Toronto which keeps demand on our housing market in the region.
The federal government has announced that they are going to increase our immigration numbers to $400,000+ for the next 3 years to make up for the dip this year. So we will expect to see those numbers come up once our embassies and foreign offices open again and can begin processing requests.
Any restrictions for International Buyers?
In Toronto our home prices were becoming inflated through 2016 and early 2017 to a concerning level. In April 2017 the Ontario government introduced a 15% “Foreign Buyers Tax” for any buyer who was not a permanent resident. The challenge was that not only were prices being driven up but in a lot of cases these homes were being left empty which further reduced an already tight housing supply. The Foreign Buyers Tax has been a deterrent, reducing the number of buyers who were investing in Toronto as a “safe haven” option but not living here. For some people, the safety of having their money in Canada is worth the 15% premium. Pre-Covid we were seeing more of “Mom and the kids” moving to Canada while “Dad” continued his work in Tehran, Shenzhen or Moscow. This seems a great solution as the kids and moms become well integrated into the fabric of life here and everyone benefits. Canada still welcomes international buyers.
Interesting tidbit, when looking at the source of immigration to Canada, Americans are the 5th largest group, with people from Indian, China and the Philippines making the top three.
How is the existing luxury development market?
The luxury market in Toronto comes in two sorts, one is stand alone “ground level” homes which are selling well, and the other is condos. As a city we have cranes everywhere. The luxury condo projects which seem to be selling well are the smaller boutique buildings, under 9 storeys with space which are often bought as downsizing options for Torontonians. The high rises (Four Seasons, Ritz, St Regis, Shangri-la, Aura) were all built in the past 10 years. We see more international buyers taking advantage of that lifestyle for its turnkey nature.
Are existing development selling out? Anything new going up?
We had a flurry of new projects released in Q3 this year; 6,695 new units were launched, which was an increase of 162% from Q3 2019. 74% of those were sold versus 63% in 2019. Granted, these are all condo projects in the GTA, not just luxury, but the market is robust.
We are looking at 23,000 units being completed in 2020 which is a record and up 47% year over year. I can think of 4 projects that have broken ground in the past 4 months with average sale prices over $2,000 per square foot.
Explain new development business in your secondary markets.
Outside of the city development depends on the jurisdiction.
Collingwood is opening up parcels of land for subdivisions and custom high end builds. One parcel of 39 new lots sold out within 20 minutes at $1,000,000 for the lots and at least 2 years before anyone will have a home. There’s another parcel of about the same size that is coming online but already sold out from the waiting list.
Muskoka greatly restricts development density along the lake shore, so anything we’re seeing there is custom luxury builds with a good lot (300 ft of frontage) and an old cottage selling for $3,000,000 or so. Any of those that came up this summer were sold.
PEC is interesting in that they are choosing to preserve the farming “feel” of the community and are prohibiting any subdividing of farm acreage.
You mentioned that you are currently seeing a surge of resale condo listings. What do you think is creating this surge?
We recently had by-laws brought out by the City that Air Bnb’s had to be registered and could only be your principal residence. This means that “investors” who had 5 or 6 units are now in violation of those by-laws and are either converting their holdings to long term rentals (which is awesome because we had a 0.4% vacancy rate prior to Covid) or are selling them. These by-laws were partially in response to people taking Air bnb’s to break Covid rules and host parties.
CURRENT STATE OF MARKET
Covid has caused people to take a solid look at their priorities and assess what they need to do to make living easier in these challenging times. The end result in Toronto has been a steady flow of listings becoming available and more buyers than supply willing to make the move.
Like our clients who sold with 5 offers, we had other clients who were listed all winter (with another brokerage). They terminated that listing in the end of March and were at their home in Florida and then came home and quarantined at their cottage. As it became apparent that borders were going to remain a challenge, and with both their 20 something kids having settled in DC (this is a family of dual citizens) they realized that having a $3.5 million dollar home in Toronto made no sense. They listed with us at a more realistic price and the house sold in a couple of weeks to a family with 1 year old twin boys who needed the space. It was a happy solution for everyone.
That is the story across the board. Anecdotal conversations say that businesses are not expecting to have full staffing back in offices until June 2021, so Torontonians are focusing on what it will take to continue to work from home and making the housing moves to accommodate those needs and we are seeing a robust market as a result.
At the lower end of the market, under $1,000,000 we are seeing buyers opt for the suburbs immediately surrounding the city where they can get a home with a backyard for the same price as a condo downtown. The average price for a condo in the City is $740,000 versus a semi in the suburbs for $800,000. Likewise, the average semi in the City is $1,150,000 versus a detached in the suburbs for $1,200,000.
Mid-market I have helped several first time buyers in the past 6 months get out of small rentals and into homes that can accommodate WFH (one was a cool loft condo that had a full “office” space on the main floor and living on the second).
Families in those first time homes are upsizing to homes with more space, or buying second properties so they can get out of the city on weekends – something that is much easier when none of the kids’ extracurricular activities are running.
These moves were definitely helped by the low interest rates for mortgages. I was chatting yesterday with a friend who locked in for 5 years at 1.84%, how can you say “no thanks” to that?
At the high end, people are even moving up more. I was in multiple offers on Friday night for a $5.6 million dollar listing (with the requisite gym and office), and had another friend buy new construction for $6.8, selling their current 10 year old home for $4.55 in under 24 hours.
And finally, empty-nester couples who have grown kids are looking at their real estate portfolios and rebalancing all of those to meet the new focus of space for visiting families and grandkids.