How will COVID-19 impact the real estate market in Canada?
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.
In the short term
A cooler spring than expected
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.
Agents need to find creative alternatives to face-to-face service
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.