As Canada's jobless claims hit 13%, with 2 million losing their jobs in the month of April, not too many Canadians are rather keen on the prospects of buying real estate at this point in time. Unless you're an investor with the funds to play around with, most Canadians aren't exactly buying "the dip" in Canadian real estate as their income and jobs are in jeopardy.
According to an article written by the Canadian Real Estate Association at the end of 2019, the projected sales and house prices in Canada to increase by 8.9% and 6.2% respectively. This year's sales activity was projected to near all-time highs as seen in 2016.
However, these projections were thrown into the trash once March came around and COVID-19 decided it wanted to go international. Home sales increased for the first two months of 2020, before dropping by 14.3% in March caused by the pandemic and its resulting government response, which scared both buyers and sellers away from the uncertain market. One positive (kinda?) data that the CREA did present that the year-to-year figure for sales activity for the month of March did increase by 7.84%, but when compared to the year-to-year figures of other months (~30%), we can see that activity has slowed down. home listing was also down by 12.5%.
CREA President, Jason Stephen, responded to the data by stating that "Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian realtors".
Certain construction restrictions have also stunted real estate development. Some construction plans had to be halted or slowed down, and future uncertainty has investors holding off on starting new building projects. Some existing investors are also deciding to pull out of already existing projects.
Although brokerages and real estate agents are deemed as "essential services", the way they're now forced to operate has changed drastically. Instead of the traditional open house, agents are now going digital, and showing clients houses through digital tours and taking photos of any parts of the house they request. Of course, buying a house is a huge financial investment, and consumers would much prefer seeing the house in person than on their laptops.
Buyers are wary of losing all of their savings buying property during this time. The fear of becoming unemployed also factors in, as securing a mortgage would be much more difficult.
On the seller side, individuals are hesitant to sell their houses at a discount rate. Unless they're in a hurry to leave, owners are holding onto their properties and hoping that prices can return back to what it was in late winter.
So how will the housing market look like after this?
Well, the pandemic was an isolated incident and the economic downturn wasn't exactly a direct result of problems in the housing market. With the population still growing in big cities like Toronto, buyer demand is still high and inventory is still low. The real estate market is set to rebound, but the real question should be when.
With physical distancing rules rumored to last for a long while, it's hard to imagine open houses happening. As provinces ease restrictions and the economy re-stabilizes, so should the housing market, and buyers & sellers should have better peace of mind while interacting in a less volatile environment. Although real estate has become discounted, for the time being, the average Canadian is more content in buying smaller investments in the stock market as opposed to a huge investment into a real estate property that they might not even get the chance to see in person.
Any thoughts? Feel free to comment below.