As the coronavirus pandemic unfolds, it continues to change the way people work and live. The outcomes of the situation have affected Toronto real estate and surrounding areas. Due to the market lag effect we likely won’t know how much the market will be affected until further down the line.
The real estate industry is considered an essential service by the Canadian government. Therefore, agents continue to guide buyers and sellers through their real estate journey, limiting and even eliminating in-person meetings. Here’s what we know is happening in the Toronto real estate market currently:
Market activity during coronavirus pandemic
February and early March showed signs that the Toronto housing market would continue to see growth and typical spring home-buying activity.
Population growth and low unemployment rates at the time were contributing to an active market. It seemed buyers were still drawn to single-family homes in the GTA, with year-over-year sales growth and listings on the incline.
However, unprecedented circumstances mid-way through March due to coronavirus are expected to cause a shift in trajectory.
According to the Toronto Regional Real Estate Board (TRREB) sales reached 8,012 home sales through March 2020 which is up 12.3 per cent compared to 7,132 sales in March 2019.
Average home prices are high in this city, sitting at $987,787 for Toronto proper in March. Yet, average selling price in March remains above last year’s average, which indicates demand for homeownership is persistent.
This data suggests that there is market activity, but it is also evident that the number of sales in the second half of March was impacted by coronavirus.
With measures such as social distancing and non-essential business closures, home searching may slow down to a degree as more people take precautions and follow social distancing bylaws.
This does not mean that the market will come to a complete halt. Despite these challenges, there will always be a need to purchase or sell a home, such as those experiencing divorce, are in the middle of an estate sale, and other circumstances. There are important reasons why the real estate industry will continue to operate and support the Toronto market.
The Canadian government is taking steps to help businesses reduce layoffs and keep employees on the payroll. For those with job security and a down payment ready, the effects of the virus won’t be an obstacle to entering the market.
A potential slowdown of bidding wars
New immigrants and family formations have contributed to rising housing demand in Toronto. Supply and demand play an important role in the state of real estate markets. Low inventories and a shortage of listings in the city often spur bidding wars between homebuyers. This can make it more difficult for buyers to enter the market, as competing offers are a common occurrence due to tight market conditions.
Yet, recent shifts could discourage people from listing their homes in the short-term, with fear of not getting the best price under current conditions. While homebuyers may take a wait-and-see approach for when the market recovers. If sellers hang in there, less competition could make this a prime time to purchase a home.
However, buyers and sellers may be surprised at how easily consumers are embracing technology to continue activity in this market. Having open houses may not be necessary, since agents can leverage online 360-degree virtual listings, panoramic images and floor plans to give the buyer the experience of an open house without being there in person.
To stay connected to your real estate agent, apps and video calling services help maintain open lines of communication.
Leverage low interest rates
As a result of the coronavirus pandemic, the Bank of Canada has reduced its benchmark interest rate to 0.25 per cent from 1.25 per cent. This is the lowest the rate has ever been.
A recent announcement to ease the mortgage stress test to give buyers more purchasing power was put on hold due to the pandemic. However, assuming the change eventually comes into play, the new stress test would factor in actual mortgage rates rather than the current posted rate system.
The good news is that this could be the perfect time to enter the market and purchase a home. Now that mortgage rates are lower, buyers can borrow more money at a decreased interest rate making their mortgage payments more affordable.
Another benefit is that homebuyers will have more housing options to choose from. Since they can qualify for more financing, it can be used to purchase a home with more of the features they desire.
First-time buyers also have the advantage of not having to sell a property in order to access the equity required to purchase a new home.
With interest rates at an all-time low, this can be considered a good time to purchase a home. Yet, the challenge will be for real estate agents to facilitate home-buying activity during this time. Here are some strategic ways the Canadian real estate market can continue during coronavirus.
Toronto real estate continues to experience housing market activity. While the coronavirus pandemic may affect the market in the short-term, we expect it to rebound when social distancing measures loosen, and we return to some normalcy. For now, it is important to take necessary precautions while participating in the market during your home-buying or selling journey to maintain health and safety.