As the result of the ongoing coronavirus pandemic, industries around the world have been impacted and in some cases completely halted. When it comes to the Canadian real estate market, the effects have already been observed. It is unsure how quickly or fully the market will recover.

Buyers and Sellers

Because of the social distancing guidelines that are in place, home sales have effectively stagnated. Sellers are unable to open their homes to potential buyers, and it is far safer from a financial and medical standpoint for potential buyers to put their plans to make a purchase on hold. The market has effectively become frozen for the duration of the pandemic due to the lack of activity.

Digital Real Estate

Thanks to the breadth of technology available to real estate professionals, much of their work can be done through digital means. In Ontario, realtors were deemed essential, allowing them to continue their work in the region, and while the execution of the work has changed, realtors are still striving to move the markets however they can. From remote stagings and home viewings to the more widespread integration of digital signatures, realtors are able to conduct business through adapting to the times and methods required of them.

Price Drops

As a natural consequence of low market activity, home prices are expected to drop over time in order to promote more sales at a faster rate. However, it is likely that this trend will not be observed until a few months from now as there is a lag in data processing when it comes to economic trends being reflected in housing market data. Even with this projected drop, it is difficult to predict how this will affect the market, as sellers do not lower their prices spontaneously and there are no concrete patterns in this behavior across all sellers.

Interest Rates

As with home prices, it is also predicted that interest rates will continue to be cut in order to encourage more individuals to take out loans and bolster the banks. While this course of action will help mitigate some of the losses incurred by reactions to the pandemic, it will not solve the problem. In tandem with fiscal support from federal sources, lower interest rates will benefit the market, but full recovery will require time.

Potential Outcomes for Recovery

Financial upsets and economic downswings are not uncommon, but the degree to which the current pandemic has affected the real estate market is unprecedented. Still, the market is projected to recover with some discretion regarding when and how it will happen. In the best case scenario, market prices may experience a dip of around 10% that is confined to a short period of time. In the worst case scenario, however, market prices could witness a longer lasting dip of up to 30%  as a result of a significant number of lost jobs, in addition to a recovery period of five or more years. 

If you are looking to buy or sell a property in the GTA, please contact Mehran Redjvani of Re/Max West.