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Good riddance, 2020!

by Neil Sharma on 04 Jan 2021

Glad that’s finally over.

2020 is a year that will be talked about for decades—and not just because the Stanley Cup was awarded at the end of September. The coronavirus changed the way we live and work, and for many that meant not working at all. 2020 wasn’t just the year the world was besieged by a health crisis; it was the year that the economy was torpedoed and of unprecedented job loss; it was the year in which small businesses—whose owners sacrificed years pouring blood, sweat and tears into their dreams—unceremoniously shuttered their doors for good.

It was also the year Canada’s real estate market showed remarkable resilience and bucked the Canada Mortgage and Housing Corporation’s gloomy forecast, which was delivered by its president and CEO Evan Siddall to the House of Commons earlier this year, of housing prices falling 9-18% from their peak. Instead, the Bank of Canada plunged interest rates and Canadians, many of whom no longer had to report to the office but were caged in small abodes during the spring lockdown, fled major cities for suburbs and exurbs. The homebuying frenzy even included cottage properties being “winterized” for year-round living. But no property type was more popular in 2020 than the vaunted single-family detached house. If anybody thought that affordability issues were dissipating in the detached home market, well, 2020 found yet another way to disappoint.

Although unemployment surged in the first half of the year, many workers returned to their jobs while others found new ones. According to a CIBC report in November, the COVID-19 pandemic was the impetus for reduced consumer spending, but with the addition of the government’s pandemic emergency programs, which bolstered incomes, the amount of money Canadians saved skyrocketed. The report found that Canadian households were sitting on $90 billion of excess cash.

“That spike in disposable incomes coincided with a notable decline in spending, which resulted in the savings rate surging from 3.6% to 28.2% as of June,” said the report. “Since then, government support has become increasingly more tailored to those who need it the most, while the re-openings have seen a nascent recovery in consumer spending. Using US data for the third quarter as a guidepost, the Canadian savings rate likely fell to 13% in Q3—still miles above the 3.6% level seen prior to the pandemic. With the second wave of infection upon us, that rate is likely to remain elevated during the winter.”

In light of how much surplus money Canadians possessed in 2020, it’s unsurprising that housing markets in Toronto, Montreal and Vancouver remained white-hot. However, Toronto’s downtown condo submarket started sputtering this year, and not just because of the pandemic. A fairly recent short-term regulatory regime resulted in an infusion of supply into the long-term rental pool, which had comprised 4,500 units pre-pandemic to over 10,000 in August, and put downward pressure on rents.

Consequently, a lot of project launches in the city were delayed this year, but as the real estate industry doggedly demonstrated, come hell or high water, Canadians are always in the market to buy homes. And according to Scott McLellan, senior vice president of Plaza Corp. in Toronto, 2021 might even play out like the year following another economic calamity from the not-too-distant past.

“As soon as there’s a vaccine to control this, the pent up demand that will be released is similar to what we saw coming out of the ’08 recession, with the condo market exploding in ’09,” McLellan told CREW in October. “People are making buying decisions now because money is so cheap; interest and mortgage rates are at historical lows and I don’t know how much longer they will stay like that. People are getting a lot more home for a lot less money.”

Moreover, international students, of whom there are typically thousands in Toronto at any given time, will be back by Q3-2021, if not sooner, and Plaza, with three project launches slated for spring, is just one of many developers anticipating that pent up demand will soon be unleashed upon downtown Toronto.

“Developers are confident demand will return. It’s the resiliency of big cities, and this is the biggest one in the country. We will always be a destination.”

Nevertheless, after the year that was, most Canadians are understandably chary about what 2021 has in store, but news of a COVID-19 vaccine becoming widely distributed has spurred cautious optimism, and that could help avert a forecasted decline in housing starts.

“In 2020 we witnessed the construction industry adapt quickly, being deemed as an essential service early on in the pandemic,” said Kush Panatch, president of Panatch Group in Richmond, B.C. “At our Port Moody project, 50 Electronic Avenue, construction carried on with teams working hard to ensure we continued working toward our project timelines. With the residential pre-sale market having performed well over the last couple of years, the construction industry will keep pace and accelerate in the New Year with projects needing to be built and come to completion. It's no secret that in B.C. we have a housing shortage. This need for housing will continue to drive the local construction industry well into the New Year and beyond.”

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