The Impact of COVID-19 on Toronto Real Estate
With the rise of COVID-19 and governments around the world asking their citizens to stay at home, the world markets have been in turmoil. What’s the impact of COVID-19 for the Real Estate Market?
Sales are still strong, but slowing
A call for social distancing by the government means that open houses can no longer take place. Fewer owners will open their homes to potential buyers for fear of contracting the virus. There is no doubt that COVID-19 has brought about major changes in the industry.
Benjamin Tal, the deputy chief economist at CIBC Capital Markets, told Yahoo Finance Canada; that the housing market was somewhat frozen at this point, which means that the number of property sales will go down temporarily. He also said that there is an endgame which is the containing the virus and this pandemic will not last forever.
With the real estate sector being a lagging economic indicator, it will take a while for trends to show in the housing market data, but for now there is still lots of sales activity. Downward pressure is not on prices, but rather on sales volume. Canadian home owners and investors are generally not highly leveraged and therefore do not turn into desperate sellers.
Real estate market continues to be stable
In Toronto, sales have been booming in the last 12 months and have continued to show increasing trends. We entered this temporary market interruption on an absolute high. Realtors in Ontario and Toronto are reporting high levels of activity. Properties are receiving multiple offers and are still selling way above the asking price.
Industry leaders and professionals do not feel that there will be a big shift in activity in the real estate market, especially since there still happens to be a big housing shortage across Canada. After we return to normal life later this year, real estate prices will recover and skyrocket in the greater Toronto area.
As the economy is grinding to a halt, with entire industries falling such as tourism, recreation and hospitality, real estate will also slow down for now. At the same time a lack of qualified buyers in certain sectors or niches will create short-term buying opportunities for savvy investors.
Property Showings continue
The local governments have cancelled all non-essential activities including the shut-down of schools, day-cares and colleges, but there is a lot of reluctance to suspend activities completely, especially in the real estate market.
Some clients want to sell their property at the best price and they are willing to have potential buyers come and view the property. While others want to limit contact and are ready to suspend their listing now or if the property does not get a buyer after a particular date.
Realtors are now using high-resolution photos, 3D Virtual Tours to show the property to potential buyers. Virtual open houses are also being conducted via Facebook Live or Google Hangout. This allows potential purchasers to view the property without actually visiting it and keeps the buyers as well as sellers safe.
A Short-Term Fall in activity expected
In terms of the overall market, there will be a reduction in activity. There will not only be a slowdown in sales, but in listing as well. This is bound to happen as people are afraid of the overall economic slowdown as well as the virus.
With the Bank of Canada cutting interest rates twice in March, the country’s six major banks lowered their lending rates for some of their mortgage products. Reduced interest rates will stimulate the market to a degree, but is not enough to combat short-term reduced confidence in the market.
The Bank of Canada also declared new actions to guarantee liquidity during the COVID-19 pandemic. They have told the customers that they will cut them some slack when it comes to allowing the deferral of mortgage payments for up to 6 months.
Pre-/Constructions expected to slow
The pre-construction sector is also feeling reduced confidence and a slowdown in sales. There will be some project cancellations and a multitude of delays in launches as well as completion of projects already under construction. Cancellations will be due to weak demand in the market and the resulting lack of construction financing.
Please feel free to reach out at any time to discuss the current real estate market as well as your individual real estate related questions.
Oliver von Bretten & Associates