Buying – Covid 19 Effects On Real Estate
For those engaged within the Canadian real estate market – buyers, sellers and homeowners – emerging media headlines about the consequences that this global health crisis will wear our economy are concerning.
Indeed, the Toronto real estate market is feeling the impact of COVID -19 rather harshly, in terms of the decline within the volume of properties being traded. And, likely, we will still feel this impact for the subsequent few months, if not longer. Although March started off super-hot within the market, the implementation of self-isolation and social distancing requirements prompted a decline in sales as we know collectively acknowledged conditions were becoming very different.
Although the real estate industry remains open for business – after being deemed an important service – only people who have to move out essentially are currently active within the market. During this point of transition, one’s expectations on the processes for the trade of assets, and what one’s return on investment should be, must be adjusted compared to pre-COVID-19 expectations.
Buyers and Seller’s expectations from the real estate market during these uncertain times? Let us take a glance at what could occur within the short- and long-term duration of pandemic.
In The Short Term
A Cooler Spring Than Expected -
Before COVID -19 was declared an outbreak by the WHO (World Health Organization) on March 11, the Real Estate market was set for a record-breaking sale (during spring), especially in Canada’s largest cities. The CREA (Canadian real estate Association) revealed the month of February was particularly hot for year-over-year sales, which rose 27 percentage nationwide, indicating the busy spring buying season had started early. Similar performance was recorded for Toronto and Vancouver homes for sale; transactions rose 45.6 percentage and 44.9 percentage year over year in those cities, respectively. Similarly, an absence of new properties on the market was a prevalent theme in major urban centres, putting the squeeze on buyers, and resulting in a tough sellers’ market situation.
Despite this strong start, however, we can now expect to determine market activity block, as buyers and sellers may reach a stalemate. Buyers may conceive of holding off on their home purchase amid uncertain health and economic conditions. At the same time, sellers—having seen what others got for his or her properties within the late winter months—may be hesitant to simply accept a lower offer today.
However, there are still people who must buy and sell right away, like people who have already sold their houses and are on a time crunch to shop for a replacement one. These “highly motivated” buyers and sellers include folks that must relocate for work, are looking for a divorce, or must downsize or upsize quickly.
As well, buyers could also be hesitant to require the plunge on a house purchase at a time when employment and income situations could change rapidly in their surroundings as well; they will be wary of lost savings within the face of the financial market downturn, or fear becoming unemployed within the near term, which might jeopardize their ability to secure mortgage financing for his or her home.
In The Long Term (Future)
The Market Will Retrieve Again -
It is hard to predict how long COVID -19 will still be a threat, together with its impacts on individuals, businesses and, therefore, on the real estate market.
For example, while the circumstances are wildly different, the last time the Ontario Real Estate market witnessed a buyer. Seller stalemate was within the spring of 2017, when the previous provincial government introduced the FHP (Fair Housing – Plan), a package of measures that included an overseas buyers’ tax for the GTA (Greater Toronto Area), and new rent controls. While the measures themselves did not hinder buyers’ financial capacity, they caused a “psychological” cooldown within the market, as nobody wanted to participate during a real estate transaction amid uncertain times. The results of that cooldown lasted into the half of 2019, before home sales and costs started showing notable year-over-year increases once more.
However, the fact is that the basics of the market, particularly within the GTA (Greater Toronto Area), and other major urban centres, do not change; pent-up buyer demand has been slowing building because the supply of accessible homes available remains scant. Thanks to the limited inventory available, combined with the increase in Ontario’s big cities like Toronto, we will expect market activity to resume and recover quickly once we have mitigated the health risks from COVID -19, and therefore the financial markets stabilize.
Agents Have To Find Creative Alternatives To Face-to-face Service
In the age of social distancing, one among the foremost obvious challenges for real estate agents is showing homes listed purchasable to prospective buyers, as everyone seems to be wary of the general public health risks showings pose, and desires to minimize in-person contact. That’s led to brokerages, including us, enforcing new company rules and guidelines that prioritize virtual interactions, leveraging tech to produce a high level of service to clients, without the in-person impact maintain social distancing rule. Because our operations are digitally enabled, our head office employees are working remotely, and our brokerage operations are paperless; we have also enacted new, stricter standards for in-person interactions.
Most real estate bodies also are calling for a cease in open houses and showings; for example, the real Estate Council of Ontario has released a strong recommendation for agents to carry virtual showings instead, and cancel all planned in-person events. The TRREB (Toronto Regional real estate Board) has also suppressed open houses on Stratus MLS and their public-facing site for all GTA (Greater Toronto Area), and Toronto real estate listings. It can not be enforcing the need to indicate a home while current government health advisories remain in effect.