Spring in Canada typically means a flurry of real estate activity. But this year, with the declaration of a global pandemic, things are not business as usual.
Here’s what you need to know about Covid-19 and its impact on real estate in Canada.
A cooler than expected spring
Before a pandemic was declared on March 11, Canada’s spring real estate market was gearing up for record-breaking sales for 2020.
The Canadian Real Estate Association revealed that year-over-year sales rose 27% nationwide in February which means that the spring market started early this year. Similar performance in Toronto and Vancouver, transactions rose 45.6% and 44.9% year over year in those cities, respectively.
But since then, national home sales decreased by 14.3% in March and newly listed properties fell by 12.5%.
For the 130,000 families who bought a home in the first two months of 2020, waiting for their transaction to close has been fraught with uncertainty.
A lot can change between a sale and the closing. These days we’re seeing prices falling, buyer’s remorse and liquidity constraints.
Declining prices could increase the loan-to-value ratio which means lenders may demand that buyers increase their funds. Or in extreme cases, lenders may not extend credit which will prevent the sale from closing.
Moderate overall impact
But some are still optimistic about the market. Phil Soper, president and CEO of Royal LePage said “from our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020. Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes.”
Though technology makes showings possible even with social distancing practices in place, many sellers are deciding to hold off to avoid low offers in this cooled market.
Evidence from Toronto in 2003 when SARS hit suggests that the housing markets in Canada did not experience a noticeable adverse impact from SARS. This means that the overall effect of coronavirus is likely to be moderate in the short run and the real estate market might recover in the following months in Canada.
Silver Lining for buyers
The silver lining for buyers is that interest rates are the lowest we have seen. Couple that with possible lower prices and it’s a great time for buyers.
With fixed-term mortgage rates also on the decline, homebuyers have the flexibility to borrow more and aim for a higher home price or get a better mortgage rate and have less expensive mortgage payments.
If you are financially able, now is a great time to buy a home. We hope our news about the real estate market in Canada in 2020 helped you to better understand the situation.
Do you have personal experience with how the real estate market is being impacted? Let us know in the comments.
Graduated from the University of Toronto with an Honors BA English Specialization and has completed several publishing courses at Ryerson University. She is a proofreader, editor, and content writer based in London, Ontario.