How will COVID-19 impact the real estate market in Canada?
From cooling down sales to changing how available homes are shown, this global pandemic will change Canadian real estate in the short- and long-term.
From cooling down sales to changing how available homes are shown, this global pandemic will change Canadian real estate in the short- and long-term.
To say the events of the past few months have had an unprecedented impact on how our society functions would be an understatement. As the threat of the COVID-19 global pandemic grows across Canada and all levels of government enact policies to stop community spread via social isolation, millions of Canadians in the non-essential workforce are now working from home and abstaining from visiting businesses and other public places.
These efforts to “flatten the curve” are paramount to keeping high-risk citizens safe and preventing our health care system from being overwhelmed. But they’re also having a profound impact on industries that rely on in-person interactions, like restaurants and hair salons. They’ve also led to fears of a global recession and limited purchasing power for consumers when the risk of the coronavirus subsides.
The real estate industry, in particular, is a prime example of one that will need to drastically adapt if it’s to be “business as usual.” While brokerages and real estate agents have been deemed “essential services” by the Ontario government, there have been some key changes to the way agents must operate—and it remains unclear how the market will perform as the pandemic evolves.
What can buyers and sellers expect from the market during these uncertain times? Let’s take a look at what could occur in the short- and long-term.
Before COVID-19 was declared a pandemic by the World Health Organization on March 11, the spring real estate market was set for a record-breaking sales season, especially in Canada’s largest cities. The Canadian Real Estate Association revealed the month of February was particularly hot for year-over-year sales, which rose 27% 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% and 44.9% year over year in those cities, respectively. As well, a lack of new properties on the market was a prevalent theme in major urban centres, putting the squeeze on buyers, and leading to tight sellers’ market conditions.
Despite this strong start, however, we can now expect to see market activity slow down, as buyers and sellers may reach a stalemate. Buyers may decide to hold off on their home purchase amid uncertain health and economic conditions, while sellers—having seen what others got for their properties in the late winter months—may be hesitant to accept a lower offer today.
However, there are still those who need to buy and sell right now, such as those who have already sold their homes and are on a time crunch to buy a new one. These “highly motivated” buyers and sellers include people who need to relocate for work, are going through a divorce, or need to downsize or upsize quickly.
As well, buyers may be hesitant to take the plunge on a home purchase at a time when employment and income circumstances could change rapidly; they may be wary of lost savings in the face of the financial market downturn, or fear becoming unemployed in the near term, which would jeopardize their ability to secure mortgage financing for their home.
Overall, those who don’t have urgent real estate needs will most likely stay on the sidelines for now, as the situation evolves.
In the age of social distancing, one of the most obvious challenges for real estate agents is showing homes listed for sale to prospective buyers, as everyone is wary of the public health risks showings pose, and wants to minimize in-person contact.
That’s led to brokerages, including Zoocasa, enforcing new company rules and guidelines that prioritize virtual interactions, leveraging tech to provide a high level of service to clients, without the in-person impact. Because our operations are digitally enabled, our head office employees are working remotely, and our brokerage operations are paperless; we’ve also enacted new, stricter standards for in-person interactions.
Most real estate bodies are also calling for a cease in open houses and showings; for instance, the Real Estate Council of Ontario has released a strong recommendation for agents to hold virtual showings instead, and cancel all planned in-person events. The Toronto Regional Real Estate Board has also suppressed open houses on Stratus MLS and their public-facing site for all GTA and Toronto real estate listings, and will not be enforcing the requirement to show a home while current government health advisories remain in effect. (Prior to the COVID-19 pandemic, listings that were not available for showings or inspections could be suspended.)
It’s hard to predict how long COVID-19 will continue to be a threat, along with its impacts on individuals, businesses and the market.
For example, while the circumstances are wildly different, the last time the Ontario real estate market witnessed a buyer-seller stalemate was in the spring of 2017, when the former provincial government introduced the Fair Housing Plan, a package of measures that included a foreign buyers’ tax for the Greater Toronto Area, and new rent controls. While the measures themselves didn’t hinder buyers’ financial capacity, they caused a “psychological” cooldown in the market, as no one wanted to participate in a real estate transaction amid uncertain times. The effects of that cooldown lasted into the second half of 2019, before home sales and prices started showing notable year-over-year increases once again.
However, the reality is that the fundamentals of the market, particularly in the GTA and other major urban centres, don’t change; pent-up buyer demand has been slowing building as the supply of available homes for sale remains scant. Due to the limited inventory available, combined with the population growth in Ontario’s big cities like Toronto, we can expect market activity to resume and recover quickly once we’ve mitigated the health risks from COVID-19 and the financial markets stabilize.
That being said, as people react and adapt to ongoing directives from municipal, provincial and federal governments, we can expect real estate sales to be impacted.
Penelope Graham is the Managing Editor at Zoocasa, a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions. View real estate listings at zoocasa.com or download Zoocasa’s free iOS app.
MoneySense is fully owned by Ratehub Inc, whose co-founder and CEO, Alyssa Furtado, is also a director at Zoocasa.com. MoneySense remains editorially independent. For more information, please read our policies:
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“Fundamentals don’t change” the author says. I disagree. This change we are going through will prove to us that more & more people can work from home when managed correctly. This is the start of a fundamental change in how we work. The longer this affects the economy the more urgency for companies to get going again and that will force them to look at telework etc. The economy cannot handle anymore hits like this.
Folks, no one could deny that At least 50% the globe is gonna face a recession which means houses and most of our assets are gonna lose that unreasonable crazy values. That’s it
Fundamentals dont change?? Repeat that statement in 2-3 months after small-mid size businesses are forced to shed employees across the GTA and globe….and potentially no longer exist. Most people alive today have not seen this before and trying to predict a “bounce back” will be very challenging.
Global recession won’t effect housing prices? Really?
The longer and deeper the COVID-19 crisis, the harder it will be to bounce back: Don Pittis
There are many reasons for the housing bubble. Many. Too many!
At the day, the two variables I believe matter most are:
1. Unemployment – Record highs now and time will tell how many of these will convert to permanent from temporary status.
2. Credit availability – If private lenders are losing on returns (they are starting to) & Banks tighten up lending (they are)
PS: The housing bubble is really a credit bubble
My realtor claims she is getting buyers who pool in money from abroad. fear of job loss is not worrying them much as they feel that the market will always have buyers who will pay them more than the price they paid to buy the property in the first place. Along with non-resident buyer tax, the government should levy extra from vacant homes.
As of today (3rd week of shutdown), I still see condos in the west GTA (in range of 800,000) sold at a premium of 2-5%. If a recession comes in, it will hit people who are living in rented accommodations, owners can bail out using federal safety net (such as 3 months stay on paying the mortgage- enough to find a buyer who will buy at a premium!).
The bankster, house flippers and fashion-shot-realtors have been over inflating this balloon for 20 years. This market does have anything close to “fundamentals”. When we come out of this with unemployment somewhere near 10-15%, who is going to buy a million dollar Toronto McMansion. You can hear the pop already, and blame the folks I listed above.
Would rural home prices raise in atlantic provinces, perhaps because people who live in large urban areas want to distance themselves?
I’ve read the same article by another realtor agency recently. Completely the same arguments as like they used one guideline and decided to promote it everywhere. “The market will bounce back because fundamental factors do not change (low inventory and population growth)…”
Note that this article is written by someone in the real estate industry and therefore biased
No doubt new and innovative real estate models that offer virtual services and gives control back to the homeowner will emerge. The real estate industry hasn’t changed in over a 100 years and it is long overdue. This crisis may be the thing that forces that change.
@David Plscopo I agree with the author regarding the Fundamentals, supply and demand will always rule any market or trade. I do completely agree with your view on work from home. Many companies will need to adapt work from home policies and good will come from it, reduced pollution, traffic, family logistics to name a few.
Maybe 200 trillion dollars or more of wealth will be wiped out in North America and the debts will remain. Canadian housing bubble will make the us housing meltdown look like Alice in wonderland. Start running!!!!
Really…like to see you come back after couple of months and tell us what you think. Covid has changed the game for all. Already a million lost their jobs and more will lose in coming weeks and months. Recession will set in and that will drive the housing market down. Will not be surprised if the correction could be as much as 20%
I have worked as a property manager of foreclosed residential and commercial real estate for over 20 years. The past couple of years the foreclosure rate has been at an all-time low since it was easy to sell off if an individual or company ran into financial difficulties. If, (or should I say when) this pandemic stretches out into months instead of weeks real estate sales will continue to drop and the banks will start taking action on defaults resulting in increased listings and lower prices. The exception may be in smaller outlaying communities as people from larger urban centres begin an Exodus. The global, national, and provincial economies have come to a screeching halt and I am not among those who think it will recover as quickly as it tanked.
Optimist: I have faith that my fellow humans will create a cure for this germ , just as they did for polio, tuberculosis and so forth.
Proof is in the pudding ; we always move forward in this life , if not we would still be driving VW Beatles and Chevy Vega’s.
Lets just hope that we learn from this collapse and the majority of society begins to live below their means and within their needs going forward and parents teach their children not just family values and respect for their fellow man but the importance of money and finance : Its a parents responsibility , the buck stops there!!
Heres to the future!! Cheers!!
This depression will also change their so called Fundamentals
Of course the managing editor of Zoocasa is going to voice next to no economic negativity relative to real estate in her article. Let’s all have a moment of silence for the time we spent reading this and the internet data used up in the creation of this joke of an article, that we’ll never get back. (-_-)
Real estate is completely out of sync with the roughly 8 to 10 fold price increase on many items since the early 70’s…wages, cars etc. As horrible as the virus is, a major correction in real estate is years overdue and would be a good thing.
nice article, positive and promising, but:
1. a lot of ppl are leaving from pay check to pay check and any changes can bankrupt them
2. canada is the winner of household debts in the entire world, maybe the second one
3. a lot of ppl are using property equal loan as a credit card to support high level living standards, that’s mean they are thinking that property will grow forever and they can cover those expenses one day
4. any kind of agent must be a positive to sell, it’s fundamental, and sure they are realizing that market was changed and try to propose alternative solutions, but is ppls are ready for it?
5. if you have a property and you are happy, think about your kids, can they afford anything today?
bubble is a bubble, it’s just a question of time when it burns, and there is not a funny thing like kind of nice and soft landing….
I made a private sale on my home in Cape Breton. To a couple from Germany. The deal currently sits on my lawyers desk. The couple that wants to purchase would like to know when they will be able to come and take possession of the house. I have been waiting to sell it for over a year now. If this deal falls through it may take another year or more to sell. So where does this leave me.
Amazing Article! well explained by real estate expert.
The Story Created by Penelope Graham is Based of Misleading and False Idea Particularly Against “The market will bounce back” Heading. It seems, either the Author of this Article has NO Knowledge and Information about Current Real Estate Scenario or Trying to Misguide the Reader of this Article towards some of his OWN Interest. It is very clear that the Real Estate Market is Going Down Rapidly. This is my own Experience and Information that a in GTA a House was Listed in Beginning of March 2020 was CAD 1199000 and Conditionally Sold a couple of Days ago at CAD 839000 and Today it has again come back to the Market.
Thus the fact is, GTA Real Estate Market Correction Expected about 50%, NO matter who says what Nonsense,
Guys this is SPONSORED CONTENT. Zoocasa paid for this article to be in Moneysense don’t believe anything you read there! They are a brokerage and just trying to sell real esate