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Market TrendsApril 16th, 2021


Abstract - 13,721 words

This research abstract will unpack the effects of an exogenous shock, such as a worldwide pandemic on the Canadian real estate market. By analyzing key economic indicators that exert influence on the housing market under any conditions, we will investigate the immediate and mid-term impacts of a pandemic as well as its long-term consequences. This abstract will investigate the following subject areas, attempting to merge all data sets into a graph that we will use to analyze and model the long-term implications for Canadian real estate.This research abstract will unpack the effects of an exogenous shock, such as a worldwide pandemic on the Canadian real estate market. By analyzing key economic indicators that exert influences on the housing market under any conditions, will try to investigate the immediate and mid-term impacts of a pandemic as well as its long-term consequences. This abstract will investigate the following subject areas, attempting to merge all data sets into a graph that we will use to analyze and model the long-term implications for Canadian real estate.





Research Overview

Section 1:  Pandemic-like Economic Cycles

Section 2:  Canadian Economic Fundamentals - Key Economic Indicators

Section 3:  Unemployment Rate and its effect on Real Estate

Section 4:  Debt Servicing Ratios of Canadians

Section 5:  Affordability - Price per square foot on a Global Scale (October 2020)

Section 6:  Impact of COVID-19 on Small Businesses and the National GDP

Section 7: Toronto Real Estate - History of Events and Timelines

Section 8:  COVID-19 and the impact on the Greater Toronto Area (GTA) real estate market

Section 9:  The Big Winners during COVID-19 (Find Out if Home Prices Have Increased in Your City)

Section 10:  Rental Market Dynamics

Section 11:  Real Estate as a store of capital

Section 12:  Greenbelt and the Urban Sprawl

Section 13:  Will Toronto Real Estate continue to appreciate for the next 100 years

Conclusion: - Where is the Toronto Real Estate market heading?






The rapid and global spread of the novel virus labelled as Coronavirus Disease (COVID-10 [also referred to as SARS-CoV-2]) has caused many countries to force country-wide shutdowns of entire workforces, closing non-essential businesses and demanding that residents stay at home. On February 11, 2020, the World Health Organization (WHO) announced this new virus as a mutation of the common coronavirus that bears similarity to the severe acute respiratory syndrome (SARS) outbreak of 2003 and officially declared a pandemic (WHO, 2020; CDC 2017). Early numbers have shown us that COVID-19 is notably more lethal than SARS was and experts expected the market shutdowns to increase well into the summer. They were correct. As of January 13, 2021, the total COVID-19 cases worldwide have multiplied exponentially and now sits at 92,747,904 essentially doubling since October 23, 2020. Simultaneously there have been 1,985,405 total deaths attributed to COVID-19 and 24,486,220 active cases, also more than doubling since October 23, 2020.


As of January 13, 2021, infections are trending upward exponentially in the majority of metropolitan cities within North America as well as globally. On January 10, 2021, Ontario reported a new highest record of daily confirmed cases at 3,945 - significantly higher than the previous record of 640 cases set on April 24, 2020 when the first wave of infections began to peak. It is important to note that testing capacities have increased dramatically at 41,000+ tests per day in Ontario compared to 12,000 tests per day in April. Irrespective of testing capacities, however, this new daily caseload benchmark  indicates that an emerging second wave is likely to begin in the Greater Toronto Area (GTA). The immediate response from the local government was to return to Stage 2 mitigation and restrictions. This means rigid limitations are set on public gatherings, local amenities, and the volume of restaurant patrons and their patios. It also continues to suggest that employers should encourage their employees to work from home. However, what does this mean for real estate?

We will investigate the impacts of a prolonged pandemic with the cascading economic shutdowns, beginning by exploring the Canadian economy that preceded the province-wide shutdowns. Afterwards, we will then  investigate the re-opening of the economy prior to the likely and oncoming second wave.

The breakdown of this abstract is as follows:

Can the COVID-19 pandemic be compared to any other modern pandemics, allowing us to understand the economic impacts that this novel virus may have on global economies? If so, how can we expect it to impact Canadian real estate?

A definition of the state of the economy in Canada and Toronto as we entered the pandemic. This will be based largely on Canada’s current Financial Statement (2019) and with insight into the survivability of a potential mini to a midsize recession.

Establish Canada’s current and historical key economic indicators and how they interact with the economy during various economic cycles, as well as their causal relationships with Canadian real estate; specifically, the GTA. We will investigate historical and current mortgage rates, unemployment rates, immigration rates into Canada as a whole and Ontario as a focus point, absorption rates, the current housing supply and demand in Toronto versus historical, housing affordability, the current total debt servicing TDS ratios of Canadians, and the velocity of money.

We will unpack the impact of COVID-19 on small business closures in Canada and, more specifically, the Toronto urban centre. 

We will then dissect the historical continuum of the Toronto real estate timeline by applying data sets to the Toronto condo market dating back to 1988. This will allow us to understand what the outcome of each economic cycle was, and what prompted any market shifts. The goal is to establish key real estate indicators that signal these shifts in advance so we can better understand the path of the Toronto real estate’s market during and post-pandemic.

 After a deep data aggregation for 30+ cities in the GTA and the outskirts, we will have a summary of how each market has performed over the first seven months of the pandemic. We will then sort and rank the data, interpreting which cities were the biggest winners and losers during the pandemic and the reasons. 

An establishment on what the rental market dynamics are for the Toronto condo market and how the ‘Absorption Rate’ and ‘Months of Inventory’ could be the strongest early indicators of potential real estate market shifts.

We will also investigate where people historically stored their money  in times of a recession and uncertainty and if there is a difference between those with a low net worth to those with a high net worth. Does this differ from those with a high net worth?

Afterwards, we will inspect the propensity of real estate to be utilized as a store of capital during the COVID-19 pandemic. Historically, real estate has been utilized as a store of capital and was considered an investment vehicle during times of economic contraction. Therefore, does this continue to be the case in 2020?

As many question how the Toronto real estate market will perform in the long term, especially during this pandemic, we will explore how the Greenbelt and subsequent landlock could impact Toronto’s real estate prices for the future. What are the implications of limited zoning for the development of residential dwellings?Is there any long term volatility in Toronto real estate?

Finally, we will overlay all the data that has been aggregated to understand the long term trajectory of the Toronto real estate market.



An Overview of Modern Pandemics, their Economic Impact, a Historical Analysis, and Future Projections.

The rise of COVID-19 occurred outside of Canada at the end of the 2019 year. For approximately three months, authorities in Asia made attempts to contain and prevent the spread of this virus. However, their efforts failed. The first confirmed cases of viral spread in Canada occurred on January 27, 2020 and community spread began by March 5. Almost immediately,  Canadian Prime Minister Justin Trudeau’s wife, Sophie Grégoire Trudeau, was tested positive for the virus and, therefore,  both she and her husband  went into self-isolation. Also around this time was when Canadian provinces and territories declared a state of emergency, closing schools and daycares and prohibiting public gatherings. Cross-border travel was shut down completely (except for trade and fellow Canadians returning home from abroad) on March 18. On March 23, Ontario shut down all non-essential businesses.

To get a sense of the global economic and health-related effects of COVID-19, we first should understand COVID-19 in relation to SARS, both in terms of scale and affect. In 2003, SARS was considered the first serious pandemic of the 21st century. SARS and other epidemics ,such as  2009’s Influenza A (H1N1), differ from COVID-19 as the latter has a much higher infection rate. 

Infection rates are used to indicate the amount of people that could be infected by a single infected individual. When the number is less than one, it is likely that the outbreak will weaken as the virus is not being widely spread. However, when the number is greater than one, it means that an infected person is passing the virus to multiple people. The following historical infection rates for modern diseases were recorded on March 2020:

H1N1 = 1.3

Ebola = 1.5 to 2.5

SARS = 3.0

COVID-19 = 1.5 to 3.5

However, by the next month, April 2020, COVID-19’s infection rates nearly doubled. To demonstrate this, we used the R0 system. R0 is a mathematical term that indicates how contagious and infectious disease is. Similarly to infection rates, it provides a number that appraises the average number of people who would be infected from a single individual. What makes it unique is that it is only used in populations that were previously free of infection and without a vaccination.The historical R0 for the same modern viruses as above are as followed :

H1N1 = 1.5

Ebola = 2

SARS = 4

COVID-19 = 5.7

To mitigate these high infection rates, many countries have adopted strategies to protect themselves:

Improved contact tracing

Government enforced mitigation efforts

Stay at home orders and business shutdowns

Prohibited travel during global case surge

The global populous adherence to wearing masks

Improved contact tracing

Effective screening at entry and exit points at larger commercial gathering spaces

Adherence to social distancing efforts at public establishments

These strategies, however, may be in place for many more months as COVID-19’s characteristics differ from other coronaviruses. Although  most modern pandemics are within the coronavirus family, their level of infection rate, death rate, and replication rate vary drastically. For example, the Spanish Influenza, originating from a form of the H1N1 virus and considered as the severest pandemic in recent history, spanned from January 1918 to December 1920 and infected 500 million people worldwide; 50 million deaths were reported. To this day, the devastating properties of the Spanish Influenza have not been identified, although it is widely believed in the medical community that this was due to a lack of a  vaccine or any antibiotics to protect against secondary bacterial infections associated with the disease. To compare, the following tables include statistics from the viruses we have mentioned earlier:

H1N1 Epidemic | 2009 - 2010

Historical Case Count = 60,800,000

Historical Death Count = 12,469

Ebola Epidemic  |  2014 - 2016

Historical Case Count = 28,652

Historical Death Count = 11,325

SARS Epidemic  |  November 2002 - July 2003

Historical Case Count = 8,098

Historical Death Count = 774  

COVID-19  |  December 2019 - present

Historical Case Count = 61,226,599 and counting

Historical Death Count = 1,435,865 and counting

Although the H1N1 epidemic had the highest number of cases, its death count is relatively small, having an average fatality rate of 0.002% for the general population. On the other hand,  COVID-19 has half as many case counts, but a significantly higher death count, having a fatality rate of 0.03%. It is clear that COVID-19 has a significantly higher impact and is on a much larger scale than other historically modern pandemic virus outbreaks. This is what makes the analysis of COVID-19’s impact on the economy equally as novel as the virus itself. Highlighted by the full economic shutdowns to prevent its exponential spread, the COVID-19 outbreak could be described as a Black Swan for the economy. Although the virus itself cannot be completely defined as an unexpected event, like a true Black Swan, as the spread was predictable well in advance within North America, the impact of the event on the economy has mimicked the response of previous pandemics. However, there are no modern epidemics that have caused such a significant economic impact as COVID-19 did, so a proper comparison cannot be done between two outbreaks.  A more suitable historical event to contrast COVID-19 would be the 2008 Financial Crisis, which caused an economic disaster and led to the worst recession since 1929’s Great Depression. We will draw upon this historical event as it relates to real estate in Section 7.



We begin by identifying the key economic indicators leading into March 23, 2020’s province-wide lockdown in Ontario,Canada’s most populous Province with a population of 14,745,040). In respect to Canadian real estate, the following statistics provide an insight to the economy before and during the pandemic:


Pre-Pandemic | Third Quarter 2019

Unemployment Rate = 5.65% 

Prime Mortgage Rate = 3.95% 

5-Year Fixed Mortgage Rate = 5.19%

Real Gross Domestic Product (GDP) = 1,640,500,00

GDP Growth = 1.6% 


During The Pandemic | Second Quarter 2020

Unemployment Rate = 10.2%

Prime Mortgage Rate = 2.45%

5-Year Fixed Mortgage Rate = 4.79%

Real GDP = 1,817,240,000

GDP Growth = -8.76% (an annualized rate of 38.7%)


Due to the mandated shutdown of non-essential business, we did not include certain economic indicators in our analysis as they have no immediate bearing on the supply and demand dynamics of the economy. In addition, other indicators that typically have a slow effect were excluded. For these reasons, the following were not taken into consideration:

Manufacturing Activity, Inventory Levels, Retail Sales, Food Services Sales, and Consumer Price Index, Balance of Trade economics, Income and Wages. 

For a real estate specific analysis we earmarked the following Supply and Demand variables to understand the market dynamics heading into the pandemic and subsequent lockdown. Understanding the market dynamics will better prepare Canadians with a potential second wave shut down of the economy playing out in the foreground. 


Pre-Pandemic | 2019’s Supply and Demand Axiom Fundamentals 

Economic Immigration to Canada =  179,050

Ontario Population Growth  =  248,002

New Housing Supply  =  61,181

Resale Housing Supply  =  63,897


As the unemployment rate in Canada hit a high in May, 2020 at 13.6%, the highest since 1976, there was a rapid increase in employment insurance (EI) over a short period of time. Over 500,000 applications were filed within the first week after the provincial business shutdowns. In comparison, for the same week of 2019, there were just under 27,000 applications. As we analyze the Canadian real estate market’s demand, these numbers are critical to our examination. They are dissected into two different parts:

Part 1 - A quantifiable decrease in demand

Someone who is suddenly unemployed is not purchasing a home anytime soon. Their priority is acquiring gainful employment and sustenance rather than buying real estate. At the peak of Ontario’s unemployment rate (13.6%) in May, 2020, 1,156,500 jobs were lost. This rate is more than doubled than February’s, which was 5.5%. However, It is important to note that between March and May, a percentage of the 13.6% unemployment rate were furloughed workers that were temporarily unemployed until the stay in-place orders for the province were loosened, allowing these non-essential employees to return to work. This is examined in great detail in Part 2. 


Part 2 - Furloughed employment

It is difficult to quantify how many unemployed workers in May were simply furloughed and will return to the labour market later in the year, but it would be a safe assumption that as the Canada Emergency Response Benefit (CERB) payments ran out and the province-wide shutdowns were loosened, a percentage of the non-essential and unemployed workforce returned to their jobs in August, 2020. Simply put, this portion of the workforce’s employment was just placed on hold until their businesses were allowed to reopen.

With these two variables considered and kept in mind, we then look at the numbers of jobs that were either newly gained or regained with the following statistics:


Ontario Jobs Gained (June) = 378,000 

Ontario Jobs Gained (July) = 151,000 

Ontario Jobs Gained (August) = 246,000 

Ontario Jobs Gained (September) = 168,000 

Total Net Jobs Gained = 943,000


Net Impact of the pandemic (October) = 340,000 jobs lost

The macroeconomic implications of 340,000 jobs lost in Ontario suggests that fewer buyers will participate in the real estate  market. As a result, this would inevitably lead to an aggregated decrease in demand.

In a recent interview with Brendan LaCerda, a senior economist with Moody’s Analytics, she suggested that with each 1% rise in unemployment, there will be a  4% drop in home prices. By using this ratio, if we were to assume that the Canadian unemployment rate reaches 11% (a 5% increase) home prices would then drop by 20%.

Expanding on this assumption, we then began to analyze the past 15 years of unemployment rates in Ontario, allowing us to make reasonable predictions to the efficacy of the above suggested correlation.



In this chart, the unemployment rate during the middle of the pandemic sat at 10.6%. If we are to believe that this 3% increase would remain relatively steady throughout the rest of the pandemic and if we were to apply LeCerda’s calculations from above, we would be looking at a 12% decrease in Ontario’s real estate prices in the next 12 to 18 months.  There have been many other regression graph models based on this equation and they bear similarities to our own predictions. The problem with all these models, however, is that there is an infinite combination of fluid variables that could impact each other in real-time and could have not been accounted for.

For example, a sudden swing in consumer sentiment could cause demand to decrease dramatically. The consumer sentiment variable would be unquantifiable because it is not grounded in data and it could alter the level of  demand in either direction without rhyme or reason. All it takes is three misinformed journalists from major publications to piggyback on a misguided interpretation of key economic indicators. If their message is persuasive and has an expansive reach, overall consumer sentiment could change almost overnight with little warning. Our thoughts on these models are that they are helpful for allowing us to understand the methodology, but they are difficult to apply to future projection models. We like to use models as a guiding methodology rather than a binary projection tool.


The important takeaway from the above chart is that the most recent unemployment rate as of October 6, 2020 remains at 10.2%, which is 1.84% higher than at the peak of the Financial Crisis in 2009. Ironically, TREB reported a 4.25% growth in terms of home prices between 2008 and 2009 while the unemployment rate increased. If we expand the data to Canada-wide, then the Canadian unemployment rate increased by 1.84% while the price of Canadian real estate increased by 2.8%. With this data, it may appear that there is no correlation between unemployment and home prices in the short-term. However, there is a consensus opinion between economists that significant increases and reduction in unemployment rates do have long-term consequences. It’s highly likely that there is a time lag and that we must closely watch the market for the next two years. The issue with this correlation, however, is that it has been seven months since the pandemic’s unemployment shock to the economy and there have been no signs of the Canadian housing market slowing down. In fact, one could argue that the opposite occurred instead as the Canadian Home Price Index (HPI) has been increasing since mid-March. We would have expected some early signs of a potential slowdown to be expressed by now, but as a whole, the market trajectory continues to trend upward. 



During the early stages of the pandemic, financial industry leaders made the above predictions about any changes to the HPI. Much of the industry was bearish on the prospects of Canadian real estates continual growth but the majority of the above predictions have since been tempered in favour of more favourable Canadian housing market predictions.

This is a prime example of why we should not try to rely on the models as projection tools, but rather use them for trend analysis by adjusting one variable at a time rather than analyzing several moving variables at once. The only models that we can rely on for quantifiable insights are based on supply and demand because each variable can be quantified in isolation, which yields more accurate projections. One projection made in May that stands out is made by the Canada Mortgage and Housing  Corporation (CMHC), which estimated a 9% to 18% decrease in home prices. 

CMHC CEO, Evan Siddall, recently did an interview with Bloomberg Markets on September 24, 2020, in regards to  his thoughts on where the Canadian housing market is heading. Siddall reaffirmed his outlook of a projected decline in housing prices, but he retracted his earlier projections of a 9% to 18% decline in prices, revising it to a  7% to 9% decline  instead. Siddal suggested that the government’s fiscal and monetary intervention had insulated the housing market to some degree and thus, he had since recalibrated his projections. With continued government support the trajectory of the Canadian economy as it relates to real estate has changed. Some programs, which were utilized to soften the pandemic’s economic impact, have contributed the following to the real estate market:


Deferred mortgage payments in parallel with eviction freezes:

$2,000/month CERB payments to anyone who lost income due to the pandemic

Continued low prime and mortgage rates

Small business payroll support program

Commercial rent support program

Siddall further suggested that reported debt-to-income (DTI) numbers are artificially low due to these support programs. As they end, such as  the mortgage deferral program that ended in September, DTI levels will rise and a percentage of the population that is over-leveraged will be affected. Those who are over-leveraged and have relied on deferring their mortgage payments will be the most affected and the most at risk of a default. Homeowners who cannot carry their mortgage costs or require equity from their home to sustain themselves will be compelled to put their properties on the market, causing a noticeable increase in inventory levels. This surge in available inventory will then bloat the supply of real estate, causing home prices to be dragged down. We believe that those homeowners who are at risk of not being able to make their next mortgage payment will likely sell below market value, creating further downward pressure on home prices. Should there be a sizeable influx of inventory all at once, this will amplify the decrease in prices even more. We believe this is an insightful take on the microeconomics of real estate and a very plausible outcome.



In August,  CMHC reported that 12% of insured mortgages in Toronto and 11% of mortgages in Vancouver have been deferred since the inception of the mortgage deferral program. This amounts to 10.78% of Canada’s total mortgage market’s payments being postponed. Since the beginning of 2020, we have seen a 22.30% increase in available properties for sale, with a majority of those listings from July and August. In July alone, there were 785,000 residential properties listed  and in August, there were 960,000. We can interpret this spike in available listings on the Canadian Multiple Listing Service (MLS) as a combination of variables. The most logical reason for the surge of inventory is likely that with the provincial shutdowns during the  outset of the pandemic, home sellers deferred their participation in the marketplace until lockdown restrictions were removed. Therefore, the  seasonal surge has been delayed to the fall market in the third quarter. In essence, we are actually experiencing our spring market during our fall market. Furthermore, if you review the chart directly above that is provided by the Canadian Real Estate Association (CREA), you will notice that this is the highest amount of Canada-wide inventory that we have experienced since 2015. 


Some additional contributors to this spike in housing inventory are:


Over-leveraged homeowners needing to sell their homes before the mortgage deferral program ended in September.

Those who have lost their jobs during the pandemic and are looking to free up the equity in their homes for sustenance.

A shift in consumer sentiment where a significant amount of consumers have decided to sell their homes, anticipating a declining market in the near future.

A declining rental market where investors are sitting on vacant units for longer than 30 days and are no longer willing to carry mortgage costs out-of-pocket without any rental prospects for their unit. In addition,  the declining rental rates in major segments of the market (such as Toronto’s condo market) have turned positive or neutral cash flow investments into negative yielding investments. As a result,  landlords and investors are not willing to wait for immigration to spike again which would trigger vacancy rates to decline and for rental rates to increase. 

Those who are not patient and are not willing to lose yield on the rental rates in the short term in favour of a positively yielding long term horizon decide to sell their investment units. Furthermore, investment/rental properties that were built prior to November, 2018 are affected by rent control. These landlords will not be able to raise their tenant’s rent to market levels when the rental rates increase again. These landlords/investors would need to end the existing lease and procure an agreement with a new tenant and the new higher monthly rate. 

We believe the above factors have contributed to the surge in the national housing supply.  We carefully analyzed the long-term trajectory of the Canadian housing market based on key real estate signals, including Absorption Rate and Months of Inventory. This will be detailed out in the following sections.



A Debt Servicing Ratio (DSR)  consists of interest payments and debt amortization as a proportion of the private and non-financial sector’s income. Therefore, the DSR is a measure of the financial constraints imposed by debt. We tracked the Canadian household debt from 1990 to 2020 and we’ve found that the debt had noticeably increased since 1993. With the current pandemic and economic downturn, it is predicted that the ratio will likely hit new highs and leave more households with more debt.


Although household debt continued to increase year over year for the past few decades, the national household debt servicing ratio has dropped by 9.35% while savings per household increased in 2020. This can be attributed to the nation-wide lockdowns causing consumer spending to decrease dramatically over Q1 and Q2 and savings to increase. One would have expected this decline in nation-wide DSR with all the non-essential services being  shut down during the early stages of the pandemic.

The Fallout

One of the key macroeconomic impacts of a nation-wide shutdown is the causal tempering of the economy and a reduction in the velocity of money. Velocity of money is “a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another.”  

In short, the velocity of money refers to  the rate at which consumers and businesses spend money. The method to calculate a country's velocity of money is defined as the national GDP that is relative to the national money supply. The higher the velocity of money, the healthier an economy is deemed to be.

Velocity Of Money

We provide an example with the graphic above. We will take into account the velocity of money between the farmer, the restaurant, and the hotel at Niagara Falls, Canada.

The farmer produces a $50 bottle of wine in their grape vineyard.

The restaurant buys the bottle of wine for $100 from the farmer. 

The restaurant sells three glasses of wine for $300.

The restaurant owners go on a vacation to Niagara Falls, staying in a hotel that costs $400.

The total velocity of money is represented by the total amount of money that exchanged hands. The original amount of $50 for the bottle of wine produced $800 worth of goods by changing hands three times. These micro-transactions continue across sectors and fuel the economy ad infinitum.

We can better understand how a pandemic can dramatically reduce the velocity of money by applying the above example to every industry and segment of the economy. The final result is then an expression of the ratio of GDP to the money supply. 

When the pandemic began in mid-March and provinces shut down all non-essential services, the velocity of money diminished dramatically. Modern Macroeconomic Theory (MMT) suggests that promoting consumer spending is the best way to create a soft landing for an economy as the country exits the pandemic. In order to ensure that people continue to spend money and to prevent dramatic reductions in the country's GDP and an acute shock to the velocity of money, the government would subsidize income by giving out money. They would then distribute it to the population in order to encourage continued spending and to minimize any reduction in the GDP. In Canada, this took the form as a COVID-19 Economic Response Plan. Some of the government response include:

EI Program: this is the same EI program that was used prior to pandemic.

CERB: a $2,000 taxable benefit that was released every four weeks, up to a maximum of 28 weeks. This benefit ended on September 26, 2020.

Canada Recovery Benefit (CRB): a continuation of CERB at $500/week for  a maximum of 26 weeks for workers whose income has reduced by at least 50% due to COVID-19 or unemployed individuals who are not eligible for EI. Applications began on October 12.

Mortgage Deferral Program

Canada Emergency Wage Subsidy


There are a total of 102 programs offered to Canadians as a part of Canada’s COVID-19 Economic Response Plan, but where is the money for these programs coming from?

A Portion of the $200 billion spent on the COVID-19  Economic Response Plan was funded by taxpayers while the rest was funded by the government printing the money. We can call this new phenomenon the velocity of printing! Quantitative Easing is being used to sustain the Canadian economy during the pandemic. Below, we will detail the theory and the likely outcome by applying the theory to Canada:

With forced economic closures,  unemployment rates soar, the GDP plummets, consumer spending halts, and the velocity of money is crippled.

MMT is enacted with the sole purpose of sustaining the Canadian population’s livelihood and to stimulate consumer spending. This drives the economy forward and prevents a complete shutdown and recession.

Increasing the money supply  continues the consumer spending, which  offsets the decline in GDP. With an increased money supply, each existing dollar is worth less and an erosion of the currency’s value begins.

As the value of currency diminishes, lending rates must decrease in order for the perceived value of money to remain equal to that of before the money supply was increased. This will encourage continued investment in big-ticket items such as  cars, houses, businesses, and personal credit products for consumer spending. This then retains the velocity of money and prevents  a complete economic shutdown. 


Short-Term versus Long-Term Implications

Governments will print money in the short-term to encourage consumer spending and to prevent a prolonged collapse of the national economy. Federal debt incurred during the pandemic can be rolled into interest payments for this debt and as a percentage of GDP.  This will have far less  economic impact than an exogenous shock to the economy that is left unaddressed. We will use the following example to explain why velocity of printing can be effective, despite that it seems as if it’d actually hinder the economy: 

$200 billion of additional debt for 10 years at 1% interest on the debt

       = $2 billion/year + interest costs

This  scenario is a reasonable tradeoff when the alternative is a repeat of the Great Recession,  which would cause the negative velocity of money to have   a multiplier effect.  This would exponentially increase the unemployment rate while simultaneously decreasing the national GDP.

The long-term second and third order effects of excessive money printing can be inflation or hyperinflation. In order to avoid excessive inflation as a long-term effect,  the government would need to  avoid quantitative easing before the early signs of excessive inflation creep into the economy. It is important to note that controlled levels of inflation are the goal and are actually  healthy. It’s hyperinflation that  governments want  to avoid. Quantitative easing should be an interruption to the pattern of an  exogenous shock to the economy, which GDP growth. Printing money is never considered as a long-term solution and has been proven to be destructive to economies, such as Japan.

How Quantitative Easing Promotes Growth Through Real Estate

One of the most obvious applications we can apply quantitative easing to is real estate. In a climate where money supply (disposable income) increases, the mortgage rates (the cost to borrow) decrease. Mortgage payments become  smaller when the cost to borrow is low and more people have disposable income to purchase homes. This causes the demand for housing to increase. Provided that supply is constant and only the demand variable changes within the equation, people will continue to be motivated to purchase property and this will add to the national GDP in several ways, with one specific example provided below:

Mortgage loans are issued, returning the velocity of money at the issued mortgage rate.

Subcontractors are paid during new construction of homes.

The subcontractors then go to restaurants to eat with their families.

To serve customers such as the subcontractors, the restaurant owners buy produce from the farmers.

The farmers are also selling beef to grocery chains.

Consumers then buy this beef from the grocery store.

The grocery store pays the salaries of their employees

One of the employees (Sally) buys a new condo and then the process repeats.

This scenario shows how interconnected real estate is within the economy and proves why quantitative easing is essential during times of economic shutdown. If Sally in the above example is permanently laid off and there is no quantitative easing, not allowing Sally to continue contributing to the economy during the pandemic, the entire sequence of events stops and the economy grinds to a halt.  Later in this abstract, we will apply key economic indicators within the Canadian economy to the Canadian real estate market to better understand what the greater picture in Canada may look for the years to come.



We investigated the global price per square foot as of October 1, 2020. After aggregating the data, we created a visual bar graph displaying some of the major metropolitan cities in the world. Toronto is added as a reference point in order to put into context where the downtown Toronto condo market sits in terms of price per square foot on a global scale. 



By comparing the data from October 2016 and October 2020, there were significant changes to the active price per square foot in both directions. Here are both the top three best and worst performing cities over this four-year period:

Note that during this 4 year period there are some significant changes to the active price per square foot in both directions. Here are the three best performing cities over this 4 year period.

Best Performing Global Condo Markets (2016-2020)

Toronto = +105%

Shanghai = +103%

Tokyo = +98%

Worst Performing Global Condo Markets (2016-2020)

Mexico City = -55%

Mumbai = -34%

London = -34%


Note that the 3 best performing markets in the past four years have been:

1  //  Toronto

2  //  Shanghai's

3  //  Tokyo 


The UBS Group recently published their annual UBS Global Real Estate Bubble Index in September, 2020. The report analyzed major urban centres around the world and identified cities that are at risk for a real estate bubble. Toronto found itself as number three on that list of identified cities This does not suggest that Toronto is currently in a real estate bubble but rather that key indicators are moving in a direction that could lead to one. In addition, it is important to point out that the report also named Chicago as the most undervalued city out of the 25 cities analyzed. This is the same city that had 421 murders in 2019 and already has 592 murders in 2020, along with rolling riots during a citywide lockdown. The report does not consider safety as a metric factored, which we at CM Analytics question as it would provide more context as to why Chicago’s real estate would be cheaper than other cities’. Nevertheless, some of the criteria used to rank Toronto as one of the top three cities at risk of entering a real estate bubble are the following:

Stretched affordability.

Considerable jumps in new housing stock that is expected to happen over the next coming quarters.

Expected appreciation of the Canadian dollar, rendering Toronto properties less attractive to foreign investors.



The Royal Bank Of Canada (RBC) published a report in June, 2020, detailing how the Toronto real estate market had become even more unaffordable during the pandemic. The report stated that based on the average Canadian household income, it would cost a homeowner:

83.1% of their yearly income to own a detached home.

45.6% of their yearly income to own a condo.

Although this may seem high to some, the affordability calculation is 3.3% higher than  the rates at the beginning of the year. This  indicates that Canadian real estate has become more affordable since pre-pandemic calculations for Q1. This is due to the household debt service ratios being reduced and the average household savings being artificially increased with the business shutdowns during the peak of the pandemic.

Toronto and Relative Affordability

Many consider Canadian real estate as a gold standard for value and safety as asset classes. As a result, foreign investors have always viewed Toronto as a safe bet for capital growth and capital security. At $1,062/sq ft, Toronto’’s condo market remains undervalued within the context of major metropolitan cities around the world. As of October, 2020 Toronto was ranked as 22nd out 77 metropolitan cities on our list of global prices per square foot, which is ordered from the city with the highest price to the lowest.. In a relatively safe country for investment along with very attractive year over year appreciation and very good rental rates, investors continue to see an excellent value proposition in Toronto. We, at CM Analytics, consider Toronto’s real estate market as undervalued on a global scale.  Based on the data that we have analyzed and compiled, it is safe to say that the downtown Toronto city cCentre presents great value on a global scale. With a yearly housing supply shortage, we will see Toronto’s real estate market continue to appreciate over the next decade. 

Along the Greenbelt that spreads across  Southern Ontario, there are restrictions on development within a tight grid for high density developments. This creates a land scarcity issue for developers, forcing them to build within tight restricted urban centres. Unless the city removes this landlocked area and opens up the Greenbelt for development, we will see the housing shortage to continue. The problem is further exacerbated by the continuing increases in levies charged to developers by the City of Toronto, further disincentivising developers to build. We will be further discussing and investigating the Greenbelt and its effect on the housing shortage in detail in Section 12.



A helpful proxy to understand GDP growth trends would be the health of commercial real estate’s economic indicators. Sudden spikes in commercial vacancies could be an indicator of business shutdowns which will be reflected in the overall health of a local economy. When the pandemic began in March, there was a large volume of reported business closures as the province-wide requirements for non-essential businesses to shut down became mandatory. This caused a record drop in the Canadian GDP during this shutdown. The  downstream consequences have been permanent layoffs, companies working with a skeleton staff, and a dramatic increase in the unemployment rate. Many of the business closures were temporary until the infection rates declined to more manageable levels, but many businesses had to  scale back their overhead. Some workers were furloughed and eventually brought back to the workplace when restrictions were lifted, but in some instances, the hours worked per week have decreased substantially. 

The overall effect of business closures on the Canadian GDP was a 38.7% contraction in the second quarter on an annualized rate, representing the single largest quarterly decline of GDP in Canadian history.  For the Canadian real estate market, however, it has not been affected by these business closures. In fact, Canadian home prices have actually risen by 2.42% in Q2, which is highest out of all the G7 countries. As a result, some would suggest that real estate has been immune to the virus!



1985 -1989: Prices rise by 113%

A bubble in the real estate market was created.

There were low unemployment rates and a large influx of immigrants.

Many people believed that housing prices were going to increase indefinitely and was a compelling investment, which caused an artificial increase in demand.

Mortgage rates increased to 12.7%.

1990 - 1993: A real estate contraction and decline

Between the end of 1989 to 1995, the average household income declined by 8.6%.

There was a spike in unemployment rates, increasing from 1989’s 7.51% to 11.38% by 1993. 

In 1990, the Months of Inventory (MOI) skyrocketed to 3.78 months.

In 1991, there was a decrease of -2.10% in real GDP. This is the first time that Canada’s GDP dropped in 30 years.

1996 - 2000: Prices rises by an average of 8.49% per annum 

From the end of 1995 to 2000, the average Absorption Rate increased from 43% to 62.4%.

In 1998, the MOI decreased to 1.22 months coupled with a high 81.69% Absorption Rate

In 1999, the downtown Toronto condo market’s MOI dropped to  1.38 months.

2007 - 2010: The Financial Crisis

The Financial Crisis was characterized by an immediate shift in the sentiment of buying property, causing demand to drop.

Months after the Financial Crisis, new listings (supply) slightly increased with the Absorption Rate growing.

In the year following the Financial Market Crash of 2007, the activity of new listings was down by 39.35%. For the entire year of 2008,  the total number of new listings in Toronto’s downtown core was 4004. Last year’s count was 6602. This drop suggests that there was a time lag in the marketplace for the momentum of market shifts to fully unravelled with the understanding or perception that the local real estate market was in decline, sellers became unwilling to participate.

It took nine  months for the Absorption Rate to break through to the 100%+ milestone, indicating that demand has increased and returned to pre-Financial Crisis levels. In the history of Toronto, this demand was the highest that Toronto’s downtown core had experienced over a 12-month period. We have tracked Absorption Rate dating back to 1988 and the only other months where it reached the 100% milestone are the following:

1997: December 

1998: December 

1999: July, October, December 2001: September

2006: December

2008: June, July, August, September, October, December 

It should be noted that the remaining months of 2008,  we saw three  additional months averaging 85%+ Absorption Rates. This was the most robust year in the Toronto downtown core in recorded history and it would be considered the golden standard for the sellers. 

Following 2008’s sequence of consecutive high absorption rate months, 2009 was the best performing year in the Toronto downtown core for condo sales, seeing a combined growth rate of 16.31% with each region growing:

C01 (Central downtown core): 8.07%

C02 (Yorkville/Annex): 30.95%

C08 (East downtown core): 9.90%

In the following year of 2010, the appreciation rates were:

C01 (Central downtown core) = 10.04%

C02 (Yorkville/Annex) = 16.89%

C08 (East downtown core) = 12.39%

This would suggest that much of the participation that we saw in 2009 came from pent up demand in 2008, which was due to the market's unwillingness to participate in a perceived declining market during 2007’s Q3 and Q4. We can contrast the data above with the data below on where the market currently sits at the end of September, 2020:

Downtown Toronto condos Absorption Rate = 26%

Downtown Toronto condos Months of Inventory = 3.88 months

It should be noted that we have not seen MOI  this high since 1990, along with the lowest Absorption Rate of 17% in the Toronto downtown core in Toronto’s  history. It is also important to draw attention to  2020’s MOI  data point as  there is a concerning high level of inventory unsold, sitting at an average rate of  3.88 months. This is the highest rate since 1989,  when the MOI sat at 3.50 months and eventually rose to 5.79 months in 1990.Other takeaways over the last 30 years include the following:

C02 appears to be the most sensitive market during shifting market dynamics. We consider C02 as a luxury condo market as the average unit price is approximately 50.4% higher than similar units in the other two  downtown Toronto areas.

When the Absorption Rate declined and MOI Increased in 2007, C02’s prices declined  by 9.33% in 2007 and by 6.11% in 2008. 

In rising markets, the C02 market appreciates with more velocity. In 2006, it increased by  36.65% and in 2009, it appreciated an additional 30.95%. 

We can deduce from the above data that luxury markets tend to be the most elastic and volatile markets during dramatic shifts in real estate.  As a whole, however, we are entering a buyer’s market as October ends. 



Sold Data From March 15, 2020 To September 31, 2020

4,156 condo townhomes

4,905 freehold townhomes

5,119 semi-detached homes

11,742 condominiums

24,487 detached homes

50,409 total homes sold


Key Real Estate Market Indicators

It is industry consensus that there are  three important metrics used to gauge the demand to supply balance: 

Seller’s Market

It is considered a seller’s market when inventory levels are below four months of inventory. 

Balanced Market

It is considered a balanced market when inventory levels are between four to six months.

Buyer’s Market

It is considered a buyer’s market when inventory levels are greater than six months. 

By breaking down the data by  market segments, we have a better idea of which divisions have been more at risk during the pandemic. Pay attention to  the surge in Toronto’s downtown condo inventory compared to detached homes and condo townhomes. Please also note that the downtown Toronto condo Absorption Rate is nearly a third of what it was in mid-March upon entering the pandemic. This increased MOI can either be a function of a:

Sharp increase in inventory (supply)

Dramatic decrease in active buyers (demand)

Combination of both above variables (the most likely scenario)

All three segments of homes have experienced increased levels of inventory, which would stem from seasonality as September through October tends to be the second-most active sales cycle during the year. With provincial shut-downs as well, the fall market has become our spring market during the pandemic. Regardless of seasonality, the Absorption Rate is exceptionally low at the moment in downtown Toronto’s condo market and the inventory levels are stacking as we enter the peak fall market.




GTA’s inventory levels increased from pre-COVID-19  levels by 52%.The largest contributor was the downtown Toronto condo market, which has increased by 307% since mid-March.

Toronto’s condo inventory in totality (includes all markets making up the GTA) has increased by 234% since mid-March.

The surge of inventory levels was slightly offset in the months between mid-March and October by a 53% increase in sales. However, the increase in the volume of sales was not enough to absorb the excess inventory that entered the market during the same period. 

The Absorption Rate of Toronto’s detached homes has decreased by 10% since the beginning of the pandemic, but it still remains extremely healthy at 50%.

The Absorption Rate of Toronto’s condo townhomes has declined by 30%, decreasing from 76% to 46% . Although this is a notable decline, Toronto real estate still remains as a very robust seller’s market.

The Absorption Rate of downtown Toronto’s condo market has plummeted by 47% and currently sits at 24%, which would be considered a balanced market but with a notable downward trend. Entering the pandemic, this was one of the top segments within the GTA , so it is the most noticeable decline.

The downtown Toronto condo market’s MOI has increased dramatically from September 2020 to October 2020 by an additional 2.5 months..

As of October 1, 2020, the downtown Toronto condo market has officially entered a balanced market and the supply and demand delta continues to grow in the direction of a buyer’s market.

As of October 18, 2020 downtown Toronto’s condo inventory has swelled to 3,113 units, quickly entering a Buyer’s Market. 

The last time that downtown Toronto’s condo market experienced a buyer’s market was January 2009 with the remnants of the Financial Crisis. The only other time prior to 2009 whenToronto’s condo market experienced a prolonged buyer’s market was January 1990 to  October 1990. During this time period,  MOI ranged from 4.06 months to as high as 9.61 months.

In 1990, Toronto’s condo market averaged its highest single year average for MOI, sitting at 5.79 months.

The average MOI of Toronto’s condo market for the past 20 years is 1.79.

As Mississauga averages the highest volume of condo sales within the GTA and outside of Toronto, we will be using Mississauga as the barometer for activity in the suburbs.  Mississauga’s condos MOI has increased by 60% during the pandemic and is trending upwards.

The Absorption Rate of Mississauga’s condos has decreased by 28% since the beginning of the pandemic. Despite this drop, however, the rate currently sits at a very balanced 43%.

The decline in rental rates is most likely the main contributor to the spike in inventory levels. As vacancies increased and monthly yields declined during the pandemic, many investors have attempted to liquidate their assets, which has been the catalyst to a surge of supply.


In this subsection, we will explore  segments of the housing market that are most at risk in the short-term and which markets will be the least impacted. Using pre-pandemic data and data as of October 2020, we find the following information:

Properties outside of the GTA have been extremely hot.  Muskoka, Uxbridge, Barrie, Scugog, Oakville, and Caledon were the big winners.

Segments within the city centres in the condo market have underperformed the freehold housing market.

Segments that have great value propositions at a lower price per square foot have done very well  These cities were Ajax, Oshawa, and Orangeville.

An interesting finding has been the exceptional performance of cottage country properties, especially the Lakelands waterfront and residential properties. We would attribute the growth and exponential interest in the area to the knee-jerk reaction from city dwellers who have decided that the GTA no longer offers the premium amenities and luxuries that offset the higher cost of living. With reasonable prices, the thought of moving into cottage country is now a great alternative, especially with many companies now allowing their employees to work from home. In addition, people moving to the Lakelands are potentially hedging a bet that there will be no vaccine or herd immunity for COVID-19 in the foreseeable future and are valuing land over city amenities in the immediate term. Other contributors to the sudden growth experienced in Cottage Country could include:

The ability to work remotely from any location.

The requirement for more space as people begin to work from home

The desire to be removed from the urban sprawl where the pandemic seems to have the widest reach and biggest impact.

The ones desire to eventually retire and live in the Lakelands region in the future, but the pandemic expedited their plans.

An investment bet that cottage country properties will be appreciating at a notably faster rate than properties within the city centre.

The big winners in the Lakelands are the Haliburton residential, Muskoka waterfront, Parry Sound residential, Parry Sound waterfront, Muskoka residential, Orillia waterfront, Orillia residential, and Haliburton waterfront. The percentage growth for each area can be seen on the above graphic. 

As for the cities within the GTA and surrounding areas, who were the big winners and losers during the pandemic? We analyzed the growth rate in home prices of 31 cities from March 2020 to October 2020 and compared them to the same time period in 2019, allowing us to determine the annual growth rate. Based on our findings, we compiled a list of the biggest winners during the pandemic and a brief summary of each city’s performance over the same course of time. 

Despite the perception that the pandemic might have had negative effects on the real estate market, it has actually grown in value. Every city had a positive uptick in prices and although the GTA is not immune to any potential economic downturns, it is currently very resilient.



Since 1988, there hasn’t been an explosion of rental inventory as big and as sudden as downtown Toronto's condo market in April 2020.  As one of the largest spikes seen in the rental market,  there was a surge in new listings as the lockdown began and renters were unwilling to seek new homes.

We charted the last five years of the rental market , beginning in Q1 of 2016, and discovered that there was a fairly consistent absorption rate and MOI leading into 2020.  Then, when the sudden increase of inventory began in Q1 of 2020, there was a dramatic widening of the spread between newly listed condos and leased condos. 

Prior to the pandemic, downtown Toronto’s condo market was experiencing an Absorption Rate of 60% and a MOI averaging 1.72 months over 64 consecutive months. As of September 1, 2020, the results from the pandemic’s unprecedented shifts in the rental market are the following:

Absorption Rate = 12%

MOI = 8.01 months

Current Inventory = 6,562 units

Leased in the past 30 days = 819 units


What caused downtown Toronto’s condo rental inventory surge?

As we traverse through the data, it is important to note that leading into mid-March, approximately 42.7% of condo owners have been investors seeking cash flow units.  Keep this in mind while reading the following information that are the main factors of the surge in downtown Toronto’s condo listing:

With the provincial-wide lockdowns, there was an unwillingness for renters to move during the pandemic and risk exposure to the virus. This caused an aggregate demand to decline. 

As the rental demand declined dramatically between mid-March and October 1, the condo investors that had a neutral cash flow were affected the most. Due to rental prices declining by 14.1% over the lockdown , these neutral cash flows quickly became negative cash flows and investors either had to carry the costs out of their own pocket or sell their units.   

New rules for short-term rentals platforms such as AirBnB,, and Expedia were put into effect on September 10, 2020 and, as a result, many short-term rental units were either pushed into the long-term rental market or were put up for sale.As an example, the Ice Condos, known as AirBnB friendly-buildings, had 158 units listed since July 1, 2020 in preparation of the new rules..

New condo completions have risen by 60% in Q1 2020  and by 30% in Q2 2019. Simultaneously, the volume of leased units only increased by 13% in Q1 2020 and decreased by 19% in Q2 2020.  Compared to Q1 and Q2 2019’s data, there were 780 less units leased this year, but 6,808 additional rental listings. The total differential year over year in the first two quarters of 2020 compared to 2019 is an addition of 7,588 condos, which is a substantial increase of supply.

Ontario’s Bill 184 received Royal Assent and lifted the eviction moratorium, allowing landlords to begin the process of evicting tenants that were in arrears during the pandemic. These same landlords would then list their condos for lease once again, causing another bump in supply.

Demand will remain low while immigration is on hold during the pandemic. Ontario relies heavily on the student market as there are many foreign students attending schools such as   the University of Toronto and Ryerson University.

These variables have flooded Toronto’s downtown condo market with an influx of new inventory, creating a downward pressure on rental suite prices. In Q1 2020, the average monthly cost of a single bedroom unit was $2,569, but in Q2 2020, it dropped to $2,405. This is a 6.39% decrease.As the MOI continues to climb and the absorption rate decreases, we will continue to see a decline in the average rental price of downtown Toronto condos. 

This phenomenon is not only limited to Toronto as it has affected most major metropolitan city centres around the world, including Paris, Sydney, San Francisco, London, Singapore, and New York City

The Fallout

This drop of $164/month in the average rental price is also a drop in an investor’s monthly cash flow. If their investment condo was yielding $0.00/month and was only covering the mortgage costs, maintenance fees, and property tax, this drop in rental rates now represents a -$164 yield for each month. In this scenario, the investor will become entirely dependent on the year-over-year appreciation of the unit as their monthly cash flow position is now negative. However, it’s likely that condo values are poised to decline in the coming months due to the surge in available condos for sale, a steep increase in MOI, and a notable decline in the Absorption Rate.

Is a decline in condo prices healthy? 

The short-term perspective of the declining prices is clearly not good for end users and an investor’s asset performance. However, it could be argued that in the long-term, an adjustment in Toronto’s downtown condo prices is necessary for the overall health of the real estate market. When prices decline, units become more attractive to both end users and investors. In addition, it would also entice new entrants into Toronto’s condo market, adding to the demand and increasing condo values in the long-term. 

If we were to assume that the unit in the visual above was to continue to appreciate for the next three years at the same rate from August 2019 to February 2020, it would be unhealthy for the longevity of Toronto’s condo market. Investors, corporations, and migrants would see a diminished value in moving to downtown Toronto as very few would be able to afford the premium costs of a condo. The market’s value proposition would be diminished and anyone shopping for a condo would elect to purchase in neighbouring cities with a more affordable and attractive value proposition. 

Furthermore, if we use price per square foot as a proxy for value, there is a diminishing value to purchasing a condo in the city when buyers could purchase larger and more viable alternatives away from the city centre and at the same price. This is typically the catalyst to an organic expansion of the urban sprawl, provided that developers are granted permits from the city to build high-density residential in emerging neighbourhoods outside of the downtown core. We will go into greater detail about the urban sprawl and Ontario’s Greenbelt in Section 12.



Where do people invest when there is a pending or a potential recession approaching?

Industries that thrive during Recessions

The industries that perform the best and are the least impacted by recessions are ones where its demand is inelastIc to fluctuations in a consumer’s income. This would suggest that real estate is highly susceptible to recessions based on two factors that are impacted in contractionary markets: 

The consumer's ability to qualify for a mortgage will decrease as lenders tend to become less flexible with their policies during recessions.

Consumers are less inclined to make substantial purchases such as cars, homes, jewelry, and other big ticket items during a pandemic. Typically,  demand will be inelastic for a $6 hamburger, but a consumer would think twice before purchasing a $600,000 condo. 

The technology sector has thrived as the industry is not reliant on physical brick and mortar locations. The ability for ecommerce and the tech industry to operate remotely has allowed companies to not only thrive, but grow during the pandemic. The following data are a few examples of this growth from March 15, 2020 to October 15, 2020: 

Other industries that thrive during contractionary markets include essential services such as the : restaurants and food industry, consumer staples, and healthcare. However, in a novel pandemic, restaurants that would be considered as a virus’ breeding ground are no longer considered as inelastic, unless they successfully pivot to a strong take-out strategy and rank well in the food delivery app algorithms.

It is important to remember that people with disposable income and liquid assets will always channel their income into the safest investments during times of uncertainty. These safer investments include government-issued bonds, gold, and real estate.


Can Real Estate be used as a Store of Capital?

When governments endlessly print money, its national currency becomes devalued. As a result, many choose to store their capital in tangible, hard assets that would preserve the value of the currency that was used to purchase them. One of these assets is real estate, but why is it considered a strong store of capital?

Historically, real estate has appreciated significantly year over year for the last 30 years in Canada and, more specifically, in Toronto. It has consistently outperformed the majority of other asset classes and has added a layer of security to capital. There have been economic cycles that have decreased home prices, but the 30 year weighted average as an asset class has proven that Toronto real estate’s market performs incredibly well.

While currency is devalued from excessive money printing and inflation, a hard asset like real estate will gain in value during an inflationary period. Provided that the property is rented out for a monthly cash flow, the asset will provide the owner with consistent and predictable passive monthly income. Once the asset is sold, the proceeds of the sale will either have the same or more purchasing power than it had prior to the inflationary period. It would have more power than if the capital was held in a deposit account due to the devaluation of currency during the inflationary period., In times of recession, it is always advised to hold capital within tangible assets such as real estate. Gold, silver, and other precious metals have performed well as a store of value during contractionary periods, but they tend to not perform as well as real estate for those who have a long-term horizon. 

With bond yields approaching the zero bound as of September 2020, real estate is quickly becoming the best option as a store of value and capital during this pandemic. 



A good practice when attempting to understand the trajectory of any capital market is to use a basic supply-and-demand model. By understanding where the equilibrium lies, you can determine when a market is imbalanced and in favor of a proportionately higher demand than supply or vice versa. In real estate, this simple model is used as a barometer for the future value of housing. A shortage in supply will typically be followed by a long-term appreciation of housing price while a proportionately lower demand will typically result in the inventory growing as units are not being absorbed. In this latter case, the downward pressure on prices will commence and will continue in the long-term until the level of demand becomes balanced. However, even balanced real estate markets appreciate over time, provided that the demand levels for housing are maintained in the long-term. 

Three markets exist within the Supply Demand theorem:

Seller’s Market = 0~4 months of inventory 

Balanced Market = 4~6 months of inventory 

Buyer’s Market = 6+ months of inventory 

Now that we have established the three different types of markets, we will introduce Ontario’s Greenbelt into the equation. Defined by the Government Of Ontario:

“Ontario's Greenbelt protects farmland, communities, forests, wetlands and watersheds. It also preserves cultural heritage and supports recreation and tourism in Ontario's Greater Golden Horseshoe.

 For a copy of Ontario’s Greenbelt Plan visit (

The Greenbelt Plan was established to preserve the integrity of Ontario’s beautiful and vast agricultural and recreational green space. Alongside the  A Place to Grow: Growth Plan,  the natural habitat of the Greenbelt is protected while also allowing the development of residential homes within designated areas in order to accommodate Ontario’s growing population. Since inception of the Greenbelt Plan, the population of the GTA is projected to grow from 7.826 Million  in 2016 to 13.5 Million in 2041. This represents a growth of 5.674 Million.

The Greater Golden Horseshoe (GGH), which is protected by the Greenbelt Plan, generates an upwards of 25% of Ontario’s annual GDP. However, there is an increased demand for major infrastructures and, as such, a substantial investment into developing the urban sprawl is required to attract immigration and sustained economic growth. Attempting to balance economic growth with environmental protection requires the government to restrict areas that can be redeveloped but as of 2016, there has only been  300,000 acres of available land. Furthermore, this land is landlocked by the Greenbelt. 

With a limited amount of land designated for residential development and a significant need for housing, supply becomes a dilemma in the GTA. In order to understand whether or not new immigration to the GTA can be sustained based on new construction trends, we have charted the yearly number of newly constructed homes against the yearly number of immigration to the GTA  between 1988 and 2020. 

The increasing delta between Housing Completions and Immigration in the Golden Horseshoe has widened since 2015 and is projected to continue to grow after 2020. With border closures during the pandemic, immigration has grinded to a halt for Q2, and the majority of Q3, causing the gap between new housing starts and immigration in the GTA to narrow. This narrowing of the Housing Supply Differential will have a time lag as units delivered for 2020 are not affected, however the aggregate Demand based on the reduced immigration in 2020 will allow the Supply to catch up with the projected demand in the coming years. 


As of October 1st 2020, permanent resident admissions Canada-wide are -44% year to date as well as a dramatic reduction in non-permanent residents in Q1 2020 and Q2 2020.


The Yearly Total Housing Supply

The chart above shows the yearly total housing supply in relation to the GTA’s population growth from 1991.  It displays the difference of the two variables and whether or not there is a yearly housing Surplus or a housing shortage.   By using 2019’s data, the following variables, and the following equations, we will demonstrate how there was a housing shortage for that year:


Static Variables

New Housing Starts (Yearly)

Ontario Population Growth (Yearly)

Rental Stock Growth (Yearly)


Differentials | Equation

New Housing Supply = New Housing Starts + Rental Stock Growth

Resale Housing Supply = Homes Listed - Homes Sold

Total Housing Supply = New Housing Supply + Resale Housing Supply


Housing Supply | Equation

Housing Supply = Total Housing Supply - Ontario Population Growth


Example - Year 2019

Housing Starts  =  58,855

GTA Population Growth  =  190,962

Rental Stock Growth  =  4,195



New Housing Supply  =  (58,855) + (4,195)

New Housing Supply  =  63,050

Resale Housing Supply = (148,084) - (84,187)


Resale Housing Supply  =  63,897

Total Housing Supply  =  (63,050) + (63,897)


Total Housing Supply  =  126,947


Housing Supply (Shortage/Surplus)

Housing Supply  =  (126,947) - (190,962)

Aggregate Housing Supply  =  -64,015  =  126,947


Housing Supply (Shortage/Surplus)

Housing Supply  =  (126,947) - (190,962)

Aggregate Housing Supply  =  -64,015


The Big Takeaway

Based on the yearly Total Housing Stock, the Greater Toronto Area will likely continue experiencing a Housing Shortage which will lead to pronounced increases in home prices in the coming years. With a cumulative deficit of 1,799,121 residential units in the Greater Toronto Area since 1991, the housing shortage issue needs to be addressed in the coming years. If not addressed, the housing affordability issue will be exacerbated and a percentage of the population will figuratively be locked out of the housing market. Until supply is ramped up in the short term achieving a more balanced housing market or demand is somehow tempered, the GTA housing market will continue to grow and housing prices will continue to rise in the long run.

You will notice in the above graph that the GTA has been running a cumulative Housing Supply Shortage since 1991 totalling a shortage of 1,799,121 residential units during this 30 year period. With an average yearly shortage of 59,971 units. This housing supply deficit will be the impetus for yearly growth in housing prices until a sustained balanced market is reached.

Source (TREB)



No one can predict exactly what the market will look like in the future but we can draw some conclusions based on the data within this abstract.

When calculating the economic impact of a pandemic, it is important to assess based on Supply and Demand interactions. 

The Demand Side Effects - can be affected by the sentiment of the populous. 

During a Pandemic - this is affected by primarily consumer sentiment, job relocation (escaping the city phenomenon), increasing or shrinking family size, marriage and consolidation of assets, divorce and separation of assets,  Population Growth (Immigration), Employment/Unemployment Rates, swing in mortgage rates.

The Supply Side Effects - can be affected by available housing stock in both new construction and resale homes. 

During a Pandemic - this is affected by New Housing Starts, Unemployment leading Sellers to list their homes for sale in need to free up capital, and an accumulation of Housing Completions.

In the three graphs below you will see the three conditions upon which the housing market operates on.

Supply is defined by resale properties Listed for sale within a calendar year plus the New Housing Starts during the same calendar year, plus growth in the rental stock during the same calendar year.


S = (Resale Properties Listed) + (New Housing Starts) + (Rental Stock Growth)

S = L + New +RS


Demand is defined by resale properties sold in a calendar year plus the subject geography’s population growth. 


D = (Properties Sold) + (Population Growth)

D = S + Pop


If the Demand exceeds the Supply within this model, then we define this state as a Housing Shortage. In the event where Supply exceeds the Demand within this model, then we define this state as a Housing Surplus. The goal within any balanced housing economy is equilibrium where the Housing Demand is equal to the Housing Supply. 

S = D  is equilibrium

Scenario 1 (Buyers Market)  //

The Housing Supply outstrips the Demand causing home prices to decrease in the long term. It is important to note that home prices will not necessarily decrease in the above scenery. If there is a prolonged Surplus in the housing stock and it is dramatically higher than the Demand, the above scenario will cause pressure for home prices to decrease. We use these three scenarios merely to point out cause and effect in extreme cases on a macro level.

Scenario 2  (Sellers Market)  //  The Housing Demand exceeds the Supply causing home prices to increase in the long term. 

Scenario 3 (Balanced Market)  //  The Housing Supply is equal to the Demand for housing creating a market equilibrium where there is little upward or downward pressure on home prices. 

During a Pandemic and the associated economic shutdown, it would be fair to make the following Demand Side assumptions:  Buyer confidence waines and less disposable income due to a higher Unemployment Rate equates to fewer real estate purchases due to a decreased Demand. Decreased buyer confidence causes buyers to apply a “wait and see” approach to see when a market decline levels off at which point they will re-enter the market. Buyer participation can decrease due to fear of an imminent decline in home prices.

On the supply side of the equation, we apply the classical macroeconomic model:

“One's expectation of a market decline and decline in housing prices will trigger their non-participation in the markets causing there to be less viable inventory. This will constrict the Supply Side economics of real estate. Fewer Sellers will want to participate in the market thereby constricting housing inventory even further than pre-pandemic levels.” 

Andrew Brunner - Founder

Eventually the virus will be contained and there will be economic consequences in the short term, however the government has made it clear that the government is using both Fiscal and Monetary policy to support growth and sustain the housing market and economy as a whole. In fact fifteen of Canada’s most renowned Economists believe that the Bank Of Canada will be holding overnight rates at 0.25% until the end of 2022. 

Source (

Since World War 2 the government of Canada through the crown corporation CMHC has been insuring mortgages to protect the health of Canada’s largest contributor to GDP, real estate. Combined with quantitative easing the government is supporting the housing market through macroeconomic intervention. 

Although Keynesian Economics will play a major role during a short term economic contraction, classic Supply Demand fundamentals remain the best gauge of the housing market as the virus is contained.

New condo sales have fallen to the lowest level since the post Financial Crisis in 2009.

Source (

Although the above was expected going into a Province wide lockdown in Q2, the level of decline is quite notable at just 1,176 pre construction sales in the GTA. This 90% decline in pre construction sales compares with Q2 2019 sales of 11,415 sales. 

With only 6 new project launches in the GTA during Q2 it is fair to say the developers have just been delaying their new development launches for Q3 when the lockdown measures have been relaxed by the province and city. We are expecting a steep increase in the Q3 data to be released shortly as the majority of these launches were in fact delayed and not cancelled. Added to the already expected Q3 launches, we are expecting one of the largest quarterly spikes in new construction releases since data has been recorded. 

The key takeaway is that there is an immense demand in the Greater Toronto Area, and coming out of the pandemic the Supply Side crunch will likely resume once demand catches up with the supply, and there will be a need to increase the volume of new developments per annum in the Greater Toronto Area. 



Entering the 2020 housing market virtually all media channels and industry experts were suggesting a critically low supply of condos in the Toronto condo market. To those that worry the Toronto condo market is on the precipice of a major correction, we encourage you to take a moment to understand the immense supply side shortage that the market faced pre-pandemic. One could suggest that the pandemic was divine intervention for the condo market leading to a man made intervention allowing the market to reach a scenario that more resembles equilibrium. It can also be argued that the inorganic growth of the housing stock in the condo market will allow Toronto real estate to become more accessible to those who previously believed that the market was not affordable and completely out of their reach. The classic economic cycle highlighted by traversal between phases of expansion and contraction are characteristic of a healthy real estate market, and something the populous should embrace. Expansion in perpetuity without a parallel increase in the average household income are in fact what makes real estate unaffordable. 

We would encourage people to approach real estate from the perspective of a contrarian. The ethos of the contrarian is to buy when people sell, and sell when the masses are buying. The challenge is that the overwhelming majority of people in the Toronto condo market succumbed to their knee jerk reaction and listed their condos for sale and rent at the same time. Now is the time as an investor to be greedy and buy, and as an end user now is the time to realize your dream of home ownership and begin building equity.

As treatment protocols and therapeutics become globally recognized to combat the COVID-19 virus and eventually a vaccine developed and deployed at scale, market dynamics will eventually return to their natural state. These natural states may have been recalibrated during the pandemic, however the mechanisms that drive local real estate markets will return. In Toronto these innate market behaviours include the following:

Mass immigration welcoming skilled labour of 341,000 new Canadians each year, of which more that one third will settle in the Greater Toronto Area equating to 118,000.

A housing shortage will continue in perpetuity until the government expands residential development initiatives within the Greenbelt, which ultimately creates a land scarcity problem for developers, and in turn a limited future supply of residential housing.

Once borders reopen to their full capacity, foreign students will begin migrating to the Toronto downtown core specifically near the major International Universities including Ryerson and University Of Toronto. This will create a sudden surge in Demand for rental condos in the downtown Core leading to rapid absorption of the rental stock, and subsequent depletion of supply. (Important to note that condo rentals were receiving multiple bids in 2019 due to the shortage of supply, and eventually the condo stock should return to balanced levels again, then inventory shortages.)

The above scenario will lead to upward pressure for the rental rates and condo rental prices will adjust upward again to pre-pandemic levels.

A second order effect includes “wait and see” buyers re-entering the market. Demand for Toronto condos were at an all time high in Toronto entering 2020, and there will be a sudden and immense re-entry into the market once there is consensus that the market is trending up again. As a contrarian the idea is to always lead the market instead of following the market. 

Toronto and Canada in general is viewed by real estate investors as a safer market to invest in for the long term as there tends to not be political unrest, real estate as an asset class insured by the government through the crown corporation CMHC. Toronto is viewed favourably by foreign investors for this reason and the security of Toronto condos as a store of capital will continue to draw foreign investment in Toronto condos as an asset class.

The top performing markets in Cottage Country will be short lived. Again, this would appear to be an impulsive reaction by city dwellers that were looking to escape the city in the early phase of the economic shutdown, but as vaccine is invented and deployed and commerce returns to the city, Demand for Cottage Country will likely level off and people will return to the urban centres.

Here is Toronto real estates performance as an asset class over the last 30 years:

Some of the headlines leading into the 2020 real estate market included:

“Excluding the Prairies together with Newfoundland and Labrador, the combined number of months of inventory for the rest of Canada is at a 15-year low – just 0.1 months above the lowest level on record – and continues to fall. The number of homes available for sale in these provinces, which represent over 80% of national activity, is at a 15-year low. This is anticipated to support solid home price growth in 2020, particularly if current trends intensify.”  |  Source (

Canadian Real Estate Association CREA

“Until governments change land development regulations, the supply of new housing will not meet demand in major cities and affordability won’t be brought under control.” (

Price Waterhouse Cooper

The consensus sentiment leading into 2020 was that the Supply Side crunch would drive housing prices up again in 2020. Until the Supply Side issue is organically resolved, the fundamentals of Toronto real estate look excellent for those with a long term horizon. 

The Toronto real estate market remains an excellent store of capital, and is one of the most exciting and vibrant cities in the world. We are all going through some hard times but the human spirit is resilient and stronger than ever. This pandemic will eventually come to an end and we will return to the city that the whole world undeniably loves! Bless Toronto and the amazing people of the city, and thank you for reading our abstract on COVID-19 and its Effect on Canadian Real Estate.




1 “COVID-19 CORONAVIRUS PANDEMIC.” Worldometer, January 13, 2020,

2  John Elflein, “Infection Rates of Viruses Worldwide,” Statista, August 24, 2020,
3 Vanessa Bates Ramirez, “What Is R0? Gauging Contagious Infections,” Healthline (Healthline Media, April 20, 2020),

4 “1918 Pandemic (H1N1 Virus),” Centers for Disease Control and Prevention, March 20, 2019,

5 “2009 H1N1 Pandemic (H1N1pdm09 Virus),” Centers for Disease Control and Prevention, June 11, 2019,

6 “2014-2016 Ebola Outbreak in West Africa,” Centers for Disease Control and Prevention, March 8, 2019,

7 “SARS,” Centers for Disease Control and Prevention, December 6, 2017,

8 "2009 H1N1 Pandemic (H1N1pdm09 virus)," June 11, 2019,

9  “Ontario Demographic Quarterly: Highlights of First Quarter 2020,” (Ministry of Finance, June 23, 2020),

10  “Canada Unemployment Rate,” Trending Economics, October 9, 2020,

11  “Canada Prime Rate History: Prime Rate vs. Overnight Rate,” Ratehub, September 1, 2020,

12  “Historical 5-Year Fixed Mortgage Rates in Canada,” Ratehub, September 1, 2020,

13  Erin Duffin, “Real Gross Domestic Product (GDP) Canada 2019,” Statista, March 4, 2020,

14  Statistics Canada, “Gross Domestic Product, Income and Expenditure, Fourth Quarter 2019,” Government of Canada, November 29, 2019,

15  Statistics Canada, “Labour Force Survey, August 2020,” Government of Canada, September 4, 2020,

16  Bank of Canada, “Daily Digest”, Bank of Canada, October 1, 2020,

17  “Historical 5-Year Fixed Mortgage Rates”, Ratehub, September 1, 2020,

18  Statistics Canada, “Gross domestic product, expenditure-based, Canada, quarterly (x 1,000,000),” Statistics Canada, October 21, 2020,

19 Jordan Press, “Canada’s GDP dropped at annualized rate of 38.7% between April and June: StatCan,” Global News, August 28, 2020,

20  “2019 Annual Report to Parliament on Immigration,” Government of Canada, July 9, 2020, Projected 2019’s economic immigration rate by analyzing the targeted numbers in the 2019 Annual Report and based on the data of the five years

21 Ministry of Finance,  “Demographics - Quarterly Highlights,” Ontario, March 18, 2020, This number was gathered by assessing all four quarters highlights of 2019

22  CMHC, “Housing Starts, Completions and Units Under Construction (Cumulative),” CMHC-SCHL, (Government of Canada, January 29, 2020),

23 Toronto Regional Real Estate Board, This number was determined by analyzing the monthly market reports of 2019

24  "Labour market report, May 2020," Ontario, June 23, 2020,'s%20unemployment%20rate%20rose%20to,Canada's%20unemployment%20rate%20was%205.6%25

25  Karri Breen, “Coronavirus: 500,000 Canadians have filed for EI this week,” Global News, March 20, 2020,

26  “Labour Force Survey, October 2020.”, Statistics Canada, November 6, 2020,

27 Katherine DeClerq, "Ontario adds jobs in June for first time since COVID-19 pandemic is declared," CTV News, July 20, 2020,

28 Katherine DeClerq, “Ontario adds 151K new jobs in July, majority are part-time positions,” CTV News, August 7, 2020,,about%20378%2C000%20jobs%20in%20June

29 Pete Evans, “Canada added 246,000 jobs in August, but employment still 1 million short of pre-COVID level,” CBC News, September 4, 2020,

30 Statistics Canada, "Labour Force Survey, September 2020," Government of Canada, October 9, 2020,

31 Real Estate Vancouver Podcast, “Will Vancouver Real Estate Prices Fall Because of COVID-19 (Coronavirus)? with Moody’s Analytics’ Economist Brendan LaCerda”, Real Estate Vancouver, March 26, 2020,

32 Bloomberg, “CMHC CEO Siddall on Canadian Housing Market Outlook,” Bloomberg, September 24, 2020,

33 Bloomberg, “CMHC CEO Siddall on Canadian Housing Market Outlook,” Bloomberg, September 24, 2020,

34 “CMHC: Mortgage Deferrals On Toronto Real Estate 12%, Vancouver 11%,” Better Dwelling, October 14, 2020,

35 “Household debt ratio rises to 176.9%, Statistics Canada says,” CBC, June 12, 2020, cbc news

36 James Chen, “Velocity of Money,” Investopedia, (Dotdash, September 16, 2020),

37 "Property Prices," Numbeo, October 1, 2020,

38 Matthias Holzhey and Maciej Skoczek, UBS Global Real Estate Bubble Index (Switzerland: UBS Switzerland AG, 2020)

39 Kenneth P. Green, Ian Herzog, and Josef Filipowicz, “The collateral damage of Ontario’s greenbelt,” Fraser Institute, accessed October 13, 2020,

40 “Canadian GDP plunges record 38.7% in second quarter,” The Canadian Press (Financial Post, August 28, 2020),

41 “Canadian Real Estate Prices Make Biggest Jump In The G7, During The Pandemic,” Better Dwelling, October 13, 2020,

42 “Toronto Housing Bubble in 1989,” Toronto Condo Bubble, February 28, 2013,

43 ‘Pre-COVID-19’ is defined as the inventory levels of March 15, 2020 and ‘October 2020’ is based on the active inventory as of October 1, 2020

44 Spencer Gallichan-Lowe, “Toronto introduces new rules for AirBnB, other short-term rental platforms,” CityNews (Rogers Digital Media, August 25, 2020),

45 Statistics Canada, “Canada Mortgage and Housing Corporation, housing starts, under construction and completions, all areas, quarterly,” Government of Canada, November 8, 2020,

46 Dania Majid, “5 Bill 184 Changes to the Law that Tenants Must Know,” Advocacy Centre for Tenants Ontario - ACTO, July 27, 2020,

47 Tyler Durden, “Apartment Prices Are Crashing In Major Cities Worldwide,” ZeroHedge, October 29, 2020,

48 Catherine Thorbecke, “The winners in a pandemic economy: Big tech and lockdown essentials soar,” ABC News, August 26, 2020,

49 “Ontario’s Greenbelt,” Ontario, (Queen’s Printer for Ontario, August 6, 2019),the%20Greenbelt%20Plan%20(2017)

50 “A Place to Grow: Growth plan for the Greater Golden Horseshoe,” Ontario (Queen’s Printer for Ontario, August, 28, 2020)

51 Tim Gray, “Who’s playing politics with the Greenbelt?,” Environmental Defence, April 30, 2018,

52 The number of total housing supply was calculated by adding the number of resale housing supply to the number of new housing supply



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Market TrendsAugust 18th, 2020


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Market TrendsAugust 15th, 2020