COVID-19 Impact on Real Estate - June 1, 2020
Sent to clients on June 1, 2020
Real Estate Market Overview
As was clear in the April 2020 home sales data from the Toronto
Regional Real Estate Board (TRREB), COVID-19 has had a big impact on
housing sales. The GTA market saw a dramatic year-over-year decline in
both sales (-67%) and new listings (64%).
And the month-to-month data tells a similar story. In January and
February it looked like we were heading into a hot spring market.
Properties were selling fast. Multiple offers and bully bids were the
norm. Sale prices were increasing. Then came coronavirus.
According to data from the Canadian Real Estate Association (CREA),
overall home sales in Canada were down 46% from 38,161 in February to
20,630 in April. New listings were down 42% from 61,816 in February to
35,795 in April. GTA sales were down 59% outpacing the national average.
The average home price in Toronto for April 2020 was relatively flat at
+0.1% compared to April 2019, but what about compared to February of
this year when the market was booming? Home prices in the GTA declined
by 10% or an average of $88,898 between February and April. At least
part of this decline is attributed to the fact that fewer luxury homes
were sold during this time frame, which would naturally skew the average
price lower.
COViD-19 & Real Estate: How Home Prices Across
Canada Have Changed In Two Months
Source: CREA
The good news is that over the past couple of weeks activity in the GTA
has started to pick up. We're receiving more and more requests for
showings on our office listings. More new listings are coming on to the
market and most are selling quickly.
Real Estate Market Outlook
I have spent the last couple of weeks listening to a number of
podcasts of various economic pundits talking about the future of
housing. Their predictions on housing prices vary from a modest increase
this year (TD and Royal LePage) to staying stable (BMO) to short-term
declines (CIBC).
On May 19, the President and CEO of the Canada Mortgage and Housing
Corporation (CMHC), Evan Siddall, told the House of Commons finance
committee that housing prices could fall up to 18% over the next year.
This is the most extreme, doomsday prediction of any of the economists,
most of whom say 5-10% down at most. For a Canadian Crown Corporation to
send such a dire signal is quite extraordinary and the censure was
swift. Christopher Alexander, EVP and Regional Director of RE/MAX said
of Siddall's comments: "A statement of this nature is panic-inducing and
irresponsible." CMHC went on to explain that this was the worst-case
scenario based on the maximum number of mortgage defaults, a situation
that likely will not happen.
Any number of variables can impact the housing market, however, the
consensus is that housing prices won't suffer a significant drop if
supply is limited. In other words, if sellers continue to wait to sell,
as they have been doing over the past many weeks, the supply will
continue to be constrained and prices will remain fairly steady.
The worst case would be if a large number of properties come on the
market at once and exceed the demand. This would lead to price
deflation. Aware of this possibility, the federal government has been
shoring up the economy with stimulus provisions designed to help
employers and employees get past coronavirus. As long as the economy can
open up in the near future, people can get back to work, pay their
bills and not be forced to sell their homes, then housing prices will
remain relatively stable. The unknown factor here is whether or not
there will be a second wave of COVID-19 requiring further physical
distancing measures and shut downs. Stating the obvious, but the sooner a
vaccine is discovered, the better it will be for the housing market and
for us all.
Home Buying Intentions
A very positive indicator for the future strength of the housing market is that buying intent remains quite strong.
In a survey conducted by IPSOS for TRREB, 27% of people said that they
would be likely to buy a home in the next 12 months. This number is
relatively flat compared to the past five-year trend.
Source: TRREB & Ipsos
However, seller intent is down with only 17% of people saying
that they are likely to sell over the next 12 months. This is down 15%
from the same time last year. Of the people who said they would not
sell, 22% mentioned COVID-19 as the reason. People believe that there
will be fewer buyers looking to buy at the moment (which isn't
necessarily true) and that prices will be lower.
Source: TRREB & Ipsos
The disparity in buying and selling intentions is good for a couple of
reasons. First of all, the fact that more sellers are waiting is what is
helping keep home prices from sliding lower. Second, its shows that
when the pandemic passes there will be a strong market recovery based on
pent up demand.
As an aside, another of the survey's findings was that although almost
70% of people were self-isolating at home in May, fewer were doing it
than in April, despite the fact that Ontario's stay-at-home status had
not changed.
Source: TRREB & Ipsos
As the COVID-19 pandemic continues, people begin to normalize the
situation, which can lead to complacency and letting down of one's
guard. We can't let this happen! It could lead to a resurgence in the
spread of the virus and a second wave of COVID-19 which will do further
damage to our economy.
Selling a Home During COVID-19
As Ontario enters phase one of reopening the province, the Ontario
Real Estate Association (OREA) has published a "Guidance on Real Estate
Transactions" outlining how REALTORS® are to conduct business. The main
theme is that health and safety must come first. Here are the
guidelines:
- Digital Tools. REALTORS® must continue to use digital tools such as virtual tours, virtual staging, video conferencing and electronic documents & signatures as much as possible.
- Personal Protective Equipment. REALTORS® must provide PPE for themselves and their clients for any in-person meeting.
- In-Person Showings. REALTORS® must continue to limit in-person showings as much as possible. If an in-person showing is necessary, REALTORS® must follow all local health guidelines such as physical distancing, wearing PPE and cleaning/disinfecting both before and after the showing. During a showing, additional safety measures include:
- Having the homeowner away from the property
- Increasing ventilation by opening windows, if possible
- Making it quick
- Not touching anything
- Limiting the number of visitors to those on the contract only. No family members
- Having the home owner or listing realtor turn on the lights and open interior doors beforehand so the visitors don't have to
- Not using the bathroom (actually, you should never use the bathroom at a showing)
How COVID-19 will change our homes
I came across an interesting article in the Toronto Star about the
lasting impact of COVID-19 on the design of our future homes. I thought
I'd share a few of the insights.
Home offices. With more people working from home, and
an expectation that this trend will continue even past COVID-19, the
need for dedicated home workspaces has been discovered (a lot of ZOOM
meetings have been crashed by young children or pets!). Having a home
office where you can close the door and escape the household while you
work is going to be important. Working on the dining room table isn't
going to be sufficient in the future. And what about two home offices?
If two people work from home, two separate spaces might be warranted.
More storage. As stockpiling essentials becomes the norm, more pantry-type storage for cans, dry goods and toilet paper will be necessary.
The 'milk-box'. The rise in online shopping and home
delivery may lead to a return of the 'milk-box', a larger mailbox where
packages can be left out of sight and protected from the elements.
Cleanliness over aesthetics. The homes of the future
will use materials and surfaces that can be cleaned and disinfected
easily. Flat surfaces, touch-less kitchen and bathroom fixtures and
self-contained 'quarantine quarters (places where family members can
self-isolate), are likely trends.
For the full article in the Toronto Star see the link below.
That's it for now. Please let me know if you have any questions or feedback at Stephanie.hebb@royallepage.ca.
Stay home and stay healthy.
Steph
More reading:
https://www.thestar.com/life/homes/2020/05/27/the-pandemic-will-change-our-homes-this-is-how.html?fbclid=IwAR0MinP3N3YMv7FcsmkUhsPC1hP_0gZgQ9kMXHN4PBcHTiRoDjdEJ-GxVsc
https://www.livabl.com/2020/05/homebuying-intentions-toronto-despite-pandemic-trreb.html?fbclid=IwAR2LoQ1F3_l-fWXJL47o5UzomKLxJvFbLvQBWSvrD611d4pDuPJP_-mo-xw
https://trnto.com/toronto-real-estate-listings-down/
https://www.livabl.com/2020/05/home-prices-could-fall-over-12-months.html
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