The world has changed dramatically since the coronavirus outbreak occurred. On a smaller scale it has affected the way people live on a day-to-day basis. On a larger scale it has affected economies and caused businesses to face extreme challenges as they try to keep their doors open.
When it comes to the real estate market, the effects of the virus will not be seen immediately. While markets have shifted, the long-term impacts on Toronto real estate prices remain to be seen.
Prior to social distancing measures, the property market was hot, with and Toronto MLS stats indicating an average housing price surpassing the $950,000 mark. This means home prices continue to be high. Earlier this year, rising sales and low inventory resulted in further acceleration of Toronto home prices year-over-year.
Yet, rampant effects of the pandemic have led to job loss, steep drops in the stock market and the potential for a real estate market slowdown.
Although traditional open houses may not be possible right now, that doesn’t mean demand for homes has waned. People still want to purchase homes and real estate agents are leveraging technology to put listings in front of buyers and ease the fears of sellers.
There are a few factors that will help determine how Toronto real estate prices will be affected as a result of coronavirus:
The real estate industry continues to operate
The provincial government announced that in Ontario, essential services may continue to operate during the coronavirus pandemic. These include real estate offices, land registration services and moving services.
Other essential services required to buy and sell a home include financial institutions and law firms, both of which continue to provide their services at this time.
While people may fear that the resources for purchasing or selling a home won’t be available, this is not the case. Homebuyers and sellers will have the support needed during their real estate process. As a result, a lack of resources will not be a factor in slowing down the market.
For some, the prospect of waiting to move isn’t an option. Whether they’ve already sold a home pre-COVID-19 and need to buy, they need to access their home equity to keep their business operating, or they’ve been laid off and need to pay the bills, the property market will need to continue operating in order to serve these individuals.
If demand continues on its current trajectory, sellers shouldn’t feel too much impact on their property value. However, if there is a slowdown and the seller is intent on selling now, they may need to reduce their price in order to attract offers. A professional real estate agent can advise sellers on their local market conditions, how to price their listing and how to get it in front of buyers.
For those who are uncomfortable with purchasing a home now, it may be in their best interest to wait until the coronavirus pandemic is resolved and the market recovers.
The duration of the pandemic
If current social distancing measures continue for a prolonged period of time, then the housing market in Toronto will reflect this. The uncertainty of the pandemic may deter some people from making home purchases.
Social distancing and self-isolation could slow down the market if people are unwilling to embrace technology to make home purchases.
The financial challenges due to non-essential closures have had a number of repercussions. Investments have lost value and job loss has occurred in certain industries. These factors could limit the financial power of people and result in decreased demand for homes.
If this happens, there is a chance that sellers will reduce prices in order to attract homebuyers or de-list their property until market activity resumes.
Lower interest rates
Real estate prices in Toronto likely won’t fall unless sellers are desperate to sell now and unwilling to wait out the pandemic. Yet, buyers can still get big savings by taking advantage of lower interest rates.
As a result of the coronavirus pandemic, the Bank of Canada has announced a decrease in its benchmark interest rate, putting the current rate is 0.25%. Buyers can now borrow a larger amount of money for mortgages and pay less interest over time.
For those who have retained their jobs and have down payment on hand, they will be in a strong position to leverage lower interest rates to make a down payment on a home.
The Canadian government is also actively taking steps to help mitigate the risks, with various benefits that will help businesses avoid layoffs and keep their employees on the payroll.
Those employed in an precarious industry may consider holding off on making a home purchase until the health crisis ends. Although, these individuals can also bring on a mortgage co-signer to give banks more peace of mind. Their mortgage rates likely will be higher because the bank will view them as more of a risk, but they will still be able to make a purchase. A mortgage broker can help to guide you through the process of securing a mortgage loan and finding the best interest rates.
Real estate agents are using technology to adapt
Prior to self-isolation and social distancing, the real estate industry created policies to help buyers feel more at ease. For example, sanitizing doorknobs, countertops and other high-contact areas before and after each open house visit were just a few of the measures put in place.
Yet, the seriousness of the issue quickly evolved, and the Ontario Real Estate Board (OREA) advised holding off on open houses for the time being. However, technology has facilitated real estate purchasing and selling while limiting in-person contact, which means sellers can maintain their desired price.
There are various tools available that allow people to search for homes online, virtually tour them, and use electronic signatures to sign documents. Agents are adapting and can hold client meetings via Zoom or other video services.
Cancelled open houses are not an indicator that the market is slowing down. The use of technology to aid home buying without in-person meetings could be a game-changer for the property market while social distancing measures continue, and beyond.
If this trend continues, sellers shouldn’t need to reduce the prices of their homes or take their listings off the market. This means there is still an opportunity to sell a home at the owner’s preferred price.
Additional measures to protect homebuyers and sellers include real estate agents adding clauses in purchasing contracts to safeguard their clients and provide them with flexibility during this uncertain time.
While, the Toronto real estate market may be affected by the coronavirus pandemic, this does not necessarily mean prices will fall. Real estate agents are using technology to help homebuyers and sellers to continue to engage in the market. The good news is that interest rates are down, so depending on your situation, you can take advantage of these savings. The duration of social distancing measures will ultimately determine how much the market will be affected.