The coronavirus has been on a fast and furious world tour, and the pandemic has left an unprecedented mark upon economies and communities globally. With the government-mandated closure of so many businesses as a precautionary measure against further spread of the virus, the daily lives of many Ontarians have been brought to an abrupt halt. Much to the relief of many homebuyers and sellers already active in the market, the real estate industry has been deemed an essential service by the Ontario government. As a result, real estate professionals across the province have worked hard to help their clients navigate the rapidly shifting market safely, and effectively.
Below, we take a look at some of the changes taking place within the Ontario Real Estate market as the country, and the world at large, battles this public health crisis:
The Closing of Open Houses
On March 18th, the President of the Ontario Real Estate Association released a plea for all member Realtors to cease open houses for the foreseeable future. Prior to the hit of the coronavirus pandemic, virtual 360-degree interactive tours and video walk-throughs were already trending as an add-on to MLS listings; in the midst of social distancing measures, these have now become a necessity for agents to showcase properties. Agents are reaching for these digital tools to help homebuyers get a feel for their listings, then are choosing to only provide in-person tours for vacant properties, and to a very limited number of people. Hand sanitizer is offered liberally, and agents alone are permitted to touch doorknobs and light switches.
Understanding that even during a public health crisis, some sellers must sell, and some buyers still need to buy, real estate professionals are working hard to ensure that the process remains as safe as possible for everyone involved.
Steadily Shrinking Interest Rates
To protect the country against the economic implications of the coronavirus spread, the Bank of Canada cut interest rates a total of three times over the month of March, bringing the overnight lending rate to 0.25 per cent – the lowest it has been in years. Canada’s big banks followed, with hefty cuts to their prime rates, making it easier for Ontarians to secure an affordable mortgage or line of credit.
These bank rate cuts were, regrettably, a limited-time offer. By the end of March, most banks had raised their prime rates back up to pre-crisis levels, in response to the increased financial risk posed by COVID-19-realted business closures and job layoffs across the country.
That’s not to say all hope is lost for future homebuyers. It is likely that once workplaces resume operations following the crisis, bank prime rates will dip back down again to align with the Bank of Canada. With many banks also offering to defer mortgage payments during the worst of the pandemic, these financial measures will help reinvigorate local real estate markets across the Province.
Slowly Slipping Real Estate Demand, Inventory, and Sales
The majority of Ontario’s real estate markets across the province are strong seller’s markets, due to dwindling supply levels that struggle to keep pace with a snowballing demand. Thanks to low unemployment rates, increasing population and strong economic growth across the province, this trend was projected to continue into 2020, according to the RE/MAX 2020 Housing Market Outlook.
Despite leaving its mark upon the real estate industry, it is unlikely that the coronavirus will have enough of an impact to tip the scales toward a buyer’s market. Given the isolation measures and the growing safety concerns due to COVID-19, many agents are working solely with clients who were already within their sales pipeline, advising other clients to press pause on their home-buying goals until later in the spring. For this reason, home sales have stayed steady within many areas across the province but will soon begin to show signs of dipping as these transactions draw to a close.
Statistics from the Toronto Regional Real Estate Board (TRREB) for the month of March confirm this trend: in the first two weeks of March, sales were up 49 per cent compared to the same period last year, but for the last two weeks of the month, sales activity plummeted, falling 15.9 per cent below last year’s levels.
In terms of home prices, cities across the province have been adjusting at different rates. In London Ontario, the average house price was up to $455,438 in March, up from the same month last year, particularly within the city’s Eastern region. Ottawa’s market showed a similar uptick, with the average home price in March surging 16.5% from a year ago. Conversely, Realtors in other parts of the province (such as Toronto and Kingston) are starting to see price levelling out, and an increasing number of properties listed at their true market value; something that is rarely witnessed within these hot seller’s markets.
At present, real estate professionals haven’t reported any panic selling activity. This suggests that while prices and demand will soften, there is unlikely to be a surge in inventory to propel a buyer’s market within the Ontario real estate market.
Constrained Consumer Confidence
An Angus Reid survey released in late March suggested that between 42 and 47 per cent of Ontario households have reported work or job loss as a result of COVID-19. With nearly a million Canadians applying for employment insurance (EI) over the month of March, it comes as no surprise that the economic fallout of this public health crisis will be felt across the country. With some signs of decreasing sales volume surfacing within some of the province’s key markets, it is expected that until consumer confidence returns, demand will continue to soften.
It remains uncertain whether interest rate cuts will be enough to reinvigorate demand within the Ontario housing market to pre-crisis levels. However, many within the industry are confident that the low inventory supplies across local markets province-wide will continue to hover below demand, and thus the seller’s markets will prevail.
Short-Term Pain for Long-Term Gain
While Ontarians are still grappling with how long these social distancing measures and business shutdowns will remain in place, there is comfort in remembering that these measures are temporary, and that this pandemic will pass. The faster that we are able to collectively fight the spread of COVID-19, the more quickly we can snap back into our daily lives and return to our post-coronavirus priorities. Should this snap-back take place in the next few months, following China’s trajectory, then there is hope that those who have pressed pause on their home search will flood the market, making for a hot summer: outside and inside the Ontario real estate market.