The outbreak of novel Coronavirus or the COVID-19 has drastically affected the global economy via its impact on every industry in one way or another. The real estate industry is not an exception to the situation. The Canadian real estate market got hit by the pandemic in one of its busiest month of the year.
Before the declaration of COVID-19 as a pandemic by WHO on March 11, the month of February showcased record-breaking sale in the Canadian real estate domain. With a 27% rise in sales, the spring buying season had started early this year. A similar case was observed in Toronto and Vancouver, where the transactions rose up to 45.6% and 44.9% respectively. This lead to a tight seller market condition. The national average home price surged up to 15%.
However, the current economic circumstances may create uncertainties in buyers regarding home purchases. The unsure income status and financial market downturn can pose a risk at the buyer’s ability to attain mortgage financing for their home.
Owing to the rising concerns of the public, the Bank of Canada declared two interest rate cuts in the month of March. Consequently, Canada’s 6 biggest banks lowered their prime rates which regulate variable mortgage rates. The banks also promised up to 6 months of payment deferral of mortgage payments and relief on credit products. According to Stephen Poloz, the bank’s Governor, the rate cut will aid in stabilizing the downturn rather than contributing to the froth.
Since the Ontario government considers real estate and brokerages as essential services, a different operating approach has been acquired amid the pandemic. The industry which thrives on one-on-one interaction and meetings between buyers, sellers and brokers are now shifting to digital solutions. Virtual home tours have come up to substitute traditional methods. Although the offices are closed, yet the real estate markets are as active as before. The brokers continue to assist customers throughZoom, FaceTime, emails, and phone call meetings.
According to Debbie Cosic, CEO and founder of In2ition Realty, certainly, the real estate industry is affected by COVID-19, yet the impact is not as adverse as one might think. He further added that while following social distancing, customers can go on a virtual tour for selling or buying houses and compare online. She concluded by saying that with the customers postponing house shopping, there might be a dip in sales. However, it is evident from the history that the situation is temporary in the long run.
Forbes also says that this time the real estate market won’t face the massive foreclosure and drop in home prices which happened after 2008. On the contrary, it is probable that till the end of the pandemic, the situation will be actually good for real estate investors.
As a conclusion, it is clear from the records and real estate data that the market fundamentals don’t fluctuate significantly in major urban centres. With the growing population and ingress of people in the big cities like Toronto, the real estate market is expected to compensate and resume on a greater pace once the COVID-19 pandemic comes to an end.
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