How will COVID-19 impact the real estate market in Canada?

A look at the current impacts in the short-term, long-term and real estate industry as a whole.

From cooling down sales to changing how available homes are shown, this global pandemic will change Canadian real estate in the short- and long-term.

Before COVID-19 was declared a pandemic by the World Health Organization on March 11, the Toronto spring real estate market was set for a record-breaking sales season.

Despite conditions of extreme uncertainty in public health and the economy, new top-tier real estate market data reveals that the Greater Toronto Area real estate market is confronting a period of turmoil from a very strong foundation.

Positioned as the country’s economic epicenter as well as its leading destination for immigration, migration, and global investment interest, the region, and its top-tier real estate market are expected to remain resilient in the long-term, and any pullbacks in the spring activity to be temporary.

What does the current real estate market look like and what can buyers and sellers expect from the market during these uncertain times?

Current Impacts

• Prices continue to soar in Toronto real estate market. 14.5% increase year over year increase so far this month (March)

• A sharp drop in Canadians searching for homes online (according to real estate portal Point2Homes). Canadian home searches on the website were 38% lower on March 23 compared to March 5.

• Sellers are trying to list their homes as soon as possible.

• The total number of sales rose last week – 18% year over year, although that’s down from 55% of the previous week.

• New listings continue to grow, 3% year over year compared to 50% the week before.

In the Short-term

A cooler spring than expected. Despite the strong start – we can now expect to see market activity slow down.

• Buyers may decide to hold off on their home purchase amid uncertain health and economic conditions.

• Overall, those who don’t have urgent real estate needs will most likely stay on the sidelines for now, as the situation evolves.

• There are still those who need to buy and sell right now, such as those who have already sold their homes and are on a time crunch to buy a new one.

• Overall, those who don’t have urgent real estate needs will most likely stay on the sidelines for now, as the situation evolves.

In the long term

The market will bounce back, however, it’s hard to predict how long COVID-19 will continue to be a threat.

• For example, while the circumstances are wildly different, the last time the Ontario real estate market witnessed a buyer-seller stalemate was in the spring of 2017 when the former provincial government introduced the Fair Housing Plan, a package of measures that included a foreign buyers’ tax for the Greater Toronto Area, and new rent controls. While the measures themselves didn’t hinder buyers’ financial capacity, they caused a “psychological” cooldown in the market, as no one wanted to participate in a real estate transaction amid uncertain times. The effects of that cooldown lasted into the second half of 2019 before home sales and prices started showing notable year-over-year increases once again.

• The reality is that the fundamentals of the market, particularly in the GTA and other major urban centres, don’t change; pent-up buyer demand has been slowing building as the supply of available homes for sale remains scant. Due to the limited inventory available, combined with the population growth in Ontario’s big cities like Toronto, we can expect market activity to resume and recover quickly once we’ve mitigated the health risks from COVID-19 and the financial markets stabilize.

• That being said, as people react and adapt to ongoing directives from municipal, provincial and federal governments, we can expect real estate sales to be impacted.

Impacts on the Real Estate Industry

Brokerages and real estate agents have been deemed “essential services” by the Ontario government. There have been some key changes to the way we realtors must operate.

• Buyers are still purchasing units in preconstruction sales for projects that will be completed in 4+ years out.

• Serious buyers have continued to bid on houses.

• Open houses have wound down and some associations and companies are now prohibiting open houses.  

• The industry is offering virtual tours instead of in-person showings and open houses. Serious buyers can follow up afterward to see a property in person.

• Investors continue to search for products and buy. Condo units in recent weeks and has found the market competitive. Units have sold at record prices.

• Sales agreements include COVID-19 clauses that require buyers and sellers to agree that both sides need to provide flexibility around the closing date for the reasons above or, for example, if one party is sick or in quarantine inside a house or condo unit.