How COVID-19 is Impacting Canadian Real Estate
Things have changed quickly. The Ontario market in February was definitely hot, with one of the largest month-over-month gains in the last decade at 5.9%1 for home sales. It looked like spring had sprung early in many markets, especially Ontario, as we headed into March, the usual kick-off month of the lucrative spring market.
And although we knew about COVID-19 making its way from Wuhan, China to other parts of the world, at the time it seemed like Canada may dodge the coronavirus bullet. And in some ways, we did. We are fortunate enough to be one of the latter countries to be hit with the novel coronavirus; this gave us time to prepare and learn from other countries' successes and shortcomings. However, experts deem that we are in the infancy of the impacts of the virus on Canadians, including the real estate market.
The good news
Let’s start with the good because we all need some positivity right now.
1. Real estate is still a solid investment – In the Canadian Real Estate Association’s Aggregate Composite MLS® Home Price Index chart1, we can see proof real estate is a good investment. The chart shows that since 2006 the majority of the past 14 years have seen excellent year-over-year percentage growth. What this means is that even in times of economic slow down, the real estate market has bounced back, and often quickly.
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.
2. Purplebricks is seeing a year-over-year increase in website traffic - With most of Canada in “physical distancing” mode, we have seen a sizeable increase in our website traffic. This means that despite the novel coronavirus outbreak, potential homebuyers are still house hunting and in the market to buy. This is also great for Purplebricks’ home sellers who are getting even more visibility to their listing than if they would’ve listed in March 2019.
3. Interest rates are low – The Bank of Canada cut interest rates on March 4 by 50 basis points, from 1.75% to 1.25%. Rates were slashed again by another 50 basis points on March 13, and another 50 basis points on March 274, bringing the interest rate to just 0.25% . Although the circumstances surrounding the rate cuts are less than positive, the reason the Bank of Canada cut the rates so drastically is to encourage Canadians to invest and borrow money. This is good news for people how need to buy and/or sell a home right now. The interest rate cuts should encourage some buyers into the market who could enjoy an appealing variable rate on their mortgage loan. For home sellers, the more buyers house hunting the better.
4. You can save thousands in commission - With uncertainty in the economy, now is an even better time to save as much as you can. If you’re planning on selling your home, know that you can save thousands in commission with Purplebricks. Our low-fixed fee allows you to have a full-service real estate experience – for thousands less! On average we save Canadians $13,500 in real estate commission† - that’s a lot of money staying in your pocket! Our REALTORS® are experts on their local markets and can help you navigate the real estate market during the coronavirus outbreak.
But what about the “Spring Market”?
The virus hit Canada right when the spring market was about to heat up. This is a tough time of year for home sellers and real estate brokerages to be struck with something so unexpected.
For many home sellers who were hoping to capitalize on the spring market, things are likely to slow down over the coming months. What home sellers need to do is adjust their expectations and not assume the hot markets we have been seeing lately will be their reality. With homebuyers doing their house hunting online, sellers are still getting excellent visibility for their home listings.
As for homebuyers, there will be some who will hold off on buying, especially those who were humming and hawing pre-coronavirus or those who have unfortunately been laid off as a result. For buyers who were dead set on buying this spring and have financials in place, there are still ways to proceed with the purchase during this time. As mentioned in the “good news” section above, interest rates are low and for buyers who are financially secure in these uncertain times, there is an opportunity to purchase a home with less competition than we have seen in previous months, even years, in some markets.
The reality is people still need to buy and sell homes. There are people who have job transfers, have an existing contract to uphold, or simply are ready financially to sell or buy. Of course, we need to tackle transactions and showings in a new way, but we can adapt – in fact, we must.
In these uncertain times, we can take comfort in years of historic data that prove real estate is a solid investment. People will always need a place to live, and this is an industry that will never go away, despite ebbs and flows.
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.