Are we Headed Towards a Mini Real Estate Boom? Possibly.
April usually marks when real estate signs are enthusiastically hammered into the ground. People are talking to their friends at dinner parties explaining how they are capitalizing on the spring market, and why everyone else should be too. There’s a hustle in the real estate world that kicks off in the spring and continues into the early summer, but that’s when things are business as usual, and truthfully, things aren’t business as usual right now.
Many Canadians who were hoping to capitalize on the spring market are holding their breath waiting to see how the real estate market reacts in the coming weeks and months amidst the COVID-19 outbreak. It is a bit of a guessing game at this point, but we can make some educated predictions.
In the short term, we expect more declines, but the market will never come to a total standstill.
As we saw in March, sales and new listings were up the first two weeks of the month, and then a sharp decline occurred in the final two weeks after the State of Emergency was declared in most of Canada. This sharp decline is a natural reaction to a dramatic event, especially to a disaster that is quite foreign to Canadians. In the Great White North, we are used to some natural disasters, like flooding and forest fires, not an airborne virus causing a national, and global, pandemic.
A decline in new listings and sales is to be expected, but we are still seeing lots of online activity on Purplebricks.ca and offers are still coming in for our home sellers. What does this mean? It means that real estate is still being bought and sold in Canada, just at a slower pace.
The reality is there are many people who simply must sell their home or buy one right now. Existing obligations, like relocation or being in an existing home contract, force people to sell or buy a home without them having much choice, even if there is a global crisis happening. There’s a reason real estate is considered an essential service.
This situation of seller and buyers potentially holding back on selling or buying a home will likely create a bottleneck in the market once physical distancing measures are lifted or relaxed. How can you take advantage of this situation? Consider marketing your home now!
With an expected bottleneck and mini boom coming, having your home on the market now may be advantageous. Once the physical distancing measures are lifted, there will be a lot of buyers who are ready to make their move quickly. Having your home already online so buyers can save it to their “favourites” as a “must-see”, will help get buyers through your front door as soon as possible. Furthermore, you can show your home virtually, which is a great option to showcase your home to agents and buyers during physical distancing. We have shared some tips on how to manage a virtual home showing.
In the long term, the impacts on the real estate market will depend on the duration and magnitude of the outbreak.
Canada is in a good position compared to many countries. At time of writing, Canada has less than 1.5% of all global cases, and nearly 32% of all Canadian cases have recovered1. Although COVID-19 is a serious issue, we are positioned to recover from this outbreak, and so is the real estate market.
The real estate market has recovered before. Take 2008-2009 as an example. Canada was in a recession and Toronto home sales reflected that. Year-over-year sales were down 32%, new listings down 11%, and days on market increased 50%2. Despite these dramatic changes in figures, average selling price was only down 5.4% year-over-year; the average price was $361,305. In 2020, few markets in Ontario see an average selling price of the mid-$300s, let alone in Toronto. As of February 2020, the average selling price was $910,2903, which is a 152% increase over 11 years – that is amazing price growth! What this example illustrates is that despite economic downshifts, the real estate market recovers and is an invaluable asset to have in your investment portfolio.
Whether you choose to buy or sell now, or wait until the outbreak is over, is a personal decision you must make. And although the duration and potential severity of the outbreak has yet to be determined, we know that the real estate market will recover in the long term, and we may see a mini real estate boom when physical distancing measures are removed in the short term.
If you need to sell your home or buy a home during the outbreak, rest assured that a REALTOR® can help you navigate these murky waters. Purplebricks is here to support Canadians by providing them full-service real estate while saving them thousands in commission when selling their home. As for homebuyers, we share the commission by giving buyers $2,000 in cash back* when they buy a home with us. Call 1-855-999-9740 for more information.
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