The coronavirus sent the world to a standstill, with almost all economic segments and business industries reeling from the shelter-at-home and social distancing measures imposed by governments across the globe.
The real estate market is one of the industries expected to be hit the hardest since agents and brokers will no longer be able to show houses around or meet with clients for documentation and settlement of payments.
Or so we thought.
After riding the tide of the COVID-19 pandemic, all the players in the property market are seeing light at the end of the tunnel. And as unthinkable as it may seem, if at all financially possible, now is actually the best time to buy property – and here’s why:
1. Canadian Real Estate Market Pre COVID-19 Pandemic
For the past two decades, the real estate market has been a booming sector for Canada and has been a real driver of the economy. It accounts for the country’s largest economic output at 15%, with energy coming in at second.
This boom is attributed to two factors: a vigorous and growing workforce and the dispersion of immigrants from foreign countries who have found Canada to be a haven for retirement or raising a family.
The housing market of the Great White North was once considered almost flawless that Vancouver condos were a better investment of wealth than gold itself.
The Canadian property market has always been seasonal, with sales slow throughout the colder weathered months and then pick up just before Spring. It’s a usual sight to see thousands of open houses from March to June since warmer weather is perfect for house hunting.
2. How the Canadian Real Estate Market Took a Hit Amidst the Coronavirus Pandemic
COVID-19 entered the scene and exploded at that time of the year when the housing market is just about to heat up. Because of the strictly imposed social distancing and stay-at-home orders, the property market came to a halt.
According to Bank of Montreal economist Robert Kavcic, “The housing market has, in unprecedented fashion, effectively shut down and closed for business.”
Tourism has all but fizzled, leaving short term rentals like those hosted by AirBnB with little to no business for the time being except to creatively offer their units as quarantine and lockdown shelters.
And as the country is still recovering from the ongoing effects of the pandemic, the number of units sold is expected to decrease.
Home Sales and Resales
Not surprisingly, home sales plummeted more than 56 percent, with those in the industry declaring that this is the worst April in 36 years.
Because people cannot go out of their homes in general, it was only normal to first secure the basic necessities like food and medicine. Since mid–March, Canadians have been more consumed with grocery purchases, securing food and medical supplies.
This has expectedly led to a dive in income for all the other businesses, whether declared essential or otherwise. The property industry has been declared essential by the Canadian government since, after all, life still happens: deaths still occur, divorces happen and people are still required to relocate for work. However, because buying a house is thousands more expensive than buying toilet paper, the latter has of course prevailed in sales.
Rates and Prices
Economics prove that housing prices are not at all immune to negative pressure. However, the average prices of houses did not go into a freefall, mostly because sellers are trying to weather out the pandemic.
Average prices of homes are only down 1.3 percent in April year to year. The steady rate of housing sales in the suburban and provincial areas such as Winnipeg, Kitchener, Waterloo and Cambridge all but make up for the fewer transactions made in the denser and costlier cities of Toronto, Vancouver and Montreal.
Deferred Mortgage Payment
In the 90s, there has been a downward shift in mortgage rates offered by banks, and Canadians have been on a buying binge since then. However, the pandemic has caused about 600,000 mortgages to be deferred as of April.
And it’s not just the ordinary Canadians who have been reportedly struggling with debt. Investors in multiple properties for short term rents are now finding themselves in deep waters.
This has prompted banks to defer mortgage payments with interest on the amounts loaned. But the public outcry on banks gaining a profit over the prevailing situation will change this as the government is looking into requiring banks to temporarily forego mortgage payments.
Home buyers have already been wary of bad mortgages, and with good reason. It’s imperative for buyers to still look out for signs of a bad mortgage, especially during these uncertain times.
Various loan programs are being offered to help cushion the blow from drawbacks in income and unemployment. There’s the Ministerial Loan Guarantees program for loans secured to finance housing on-reserve.
Other measures such as pre-approved loans and more enhanced eligibility criteria for consumers and businesses alike in response to COVID-19.
As brokerages and real estate agencies have been deemed essential services, it’s just right to call it “business as usual”. The internet has allowed agents and brokers to forego the typical face-to-face selling and instead do virtual consultations, remote video conferencing, sending digital documents for signing and relying on mobile notaries for legal matters.
And of course, there’s the old-fashioned and reliable method of calling your client…. lol.
Clients can now go on a virtual 360-degree tour of a house instead of an open house. Virtual house tours have now been enhanced to replicate the experience of actually walking into an open house and feeling every section and room in the house. With just a Zoom or Skype call, you can get in touch with your agent anytime, anywhere.
Listings are also updated regularly, so clients can scan the latest offerings without having to leave the comfort of their homes. And if you want more information, there is a plethora of listing sites that are rich in data and detail to suit your needs.
4. Real Estate Forecast for the Rest of 2020 Amidst COVID-19
The property market, in general, is still expected to feel the negative impact brought on by COVID-19. The weakening of the employment industry will affect purchasing behavior and the perception of what is essential. Experts are declaring that in the next few months, it’s not expected for the market to go back to where it was pre-pandemic.
The government has already implemented fiscal measures to mitigate panic and limit housing prices from being depressed through forced selling. Through the Canada Emergency Response Benefit (CERB) and Canada Emergency Wage Subsidy (CEWS), Canadians can sustain most of their expenses and way of living.
However, there is actually a small boom in sales of exurban housing, with a rise of purchases of property in areas like Waterloo, Kitchener and Cambridge. The homes are cheaper and the quality of life is perceived to be better and more family-oriented. Clients who were aiming for a different, quieter lifestyle, have gone on ahead with their purchase amidst the pandemic.
Despite the supposedly perceived dismal numbers reported in April, the housing market is still looking up, since 4 out of 10 buyers in the major cities still were either actively looking for property to purchase or have successfully done so. In the smaller, more rural cities, the numbers are even higher, with about 6 out of 10 buyers are engaged in the property market despite respectfully adhering to sheltering-in-place restrictions mandated by the Canadian government.
Now, if you’re wondering about the rates, well, you’re right to assume that interest rates for buying a home are the lowest we’ve seen. Banks worldwide, with Canadian banks not being an exception, have been cutting interest rates. In fact, the Bank of Canada cut the interest rate for Canadians by a full percentage point earlier this month.
With this, potential home buyers who are seriously looking to get a mortgage can now expect to borrow at a lower rate. This then allows for more flexibility in your plan to purchase a house that may be higher than what you previously aimed for.
5. Have a Mortgage Broker Help You
This pandemic is actually a perfect setting to weed out the serious property buyers and sellers from those that are still on the fence. Virtual tours are proving to be very useful. People are only going to look at a house after they’ve seen it online and are really serious. Plus, the prevailing interest rates and loan payment schemes can only encourage the most optimistic of buyers and sellers.
Let an honest, reliable mortgage broker help guide you through these uncertain times. A mortgage broker could easily help you see the true picture of what’s happening in home prices until buying and selling real estate can get back to what we may call “some semblance of normalcy”. After all, this house can be the largest financial purchase of your life and you’ve been planning for it for quite a long time.
It’s undeniable that the real estate market cannot be expected to go back to normalcy anytime soon. But that doesn’t mean that a buyer or seller cannot take advantage of the opportunities presented by a supposedly dismal market setting.
Depending on where you’re at situationally or whatever your circumstances may be, a mortgage broker can maximize the opportunity to earn more profit or save on costs for your next house purchase or sale.