Like many of you, we’re looking forward to things getting back to ‘normal’ – though nobody really knows what ‘normal’ will look like, how long it will take to get there or what the transition period in-between will look like.
Real estate markets are intrinsically tied to employment, immigration and the general health of the economy – all things that are nearly impossible to predict right now. We won’t pretend to know what will happen – these are unprecedented times, after all – but we can share the questions we’re asking about Toronto real estate in a post-COVID world:
- When does this all end? How long will social distancing last? Will we see a second or third wave of coronavirus and additional distancing measures if we kick-start things too soon?
- Where are the job losses happening, how deep are they and how long will it take the job market to recover? People need jobs to qualify for new mortgages, and incomes to pay their existing mortgage obligations. The 6-month mortgage deferral program is buying homeowners time, but what happens when it’s over? How fast will Torontonians get back to work?
- What will happen to Toronto Tenants & Landlords? COVID-19 is already affecting tenants and landlords…how bad will it get? So many of Toronto’s rentals are owned by individual investors who are struggling with the double-whammy of tenants who can’t pay their rent and the temporary loss of their ability to enforce lease agreements while the Landlord Tenant Board is closed. What about the thousands of short term rental units that are now shut down and bleeding money for their owners? Will investors decide to exit the market? Or will they double-down and buy more properties if there’s a dip in prices?
- What will happen to the pre-construction real estate market? What will the financial impact of COVID be on new home and condo builders? How will the Buyers who’ve already entered into contracts be affected? How long will construction be delayed? Will we see more projects cancelled? Which builders won’t make it?
- How will commercial real estate be affected? The restaurant and retail sectors of our economy were hit hard and fast by COVID, and while the federal government is trying to bridge individuals and businesses, there’s no doubt the retail and restaurant landscape will look different when this is over. How will that impact commercial real estate prices and leases?
- What does contactless real estate look like? If social distancing measures continue, how will Buyers, Sellers and the real estate industry adapt? There are stop-gap measures in place right now, but they are far from ideal for the longer term. What does buying or selling a home look like if we need to minimize personal contact? Will people buy a home they’ve never visited in person?
- What kind of life transitions should we expect post-COVID? Marriage, divorce, babies and death are some of the top reasons people buy or sell a home. Without a doubt, the coronavirus will force people into new life transitions and with it, new real estate decisions.
- How will our relationship with ‘home’ change as a result of self-isolation and quarantine? Our homes have become our workplaces, our kids’ schools, our safe refuge from the coronavirus. For some, ‘home’ has become a 24/7 prison with spouses or roommates we don’t want to live with, while others are feeling trapped by condominium rules they don’t control and vulnerable to the realities of communal living. Undoubtedly, this will have a lasting impact on how we view ‘home’ in the future and what we value. Will people want bigger houses? Private outdoor space? How will the need for home offices change? Will our love affair with condos be impacted by the unique challenges faced by condo dwellers during COVID? Will people want to flee the city or flock to it?
- What kind of Government intervention will we see for real estate? We’ve seen a dizzying number of new government programs to help support individuals and businesses through the crisis. Will we see decreases in land transfer taxes to help spur the real estate market at some point? New first-time Buyer programs? Removal of the foreign Buyer tax and mortgage stress tests? Lower property taxes?
- How will the stock market declines affect down payments? Mid-term and longer-term Buyers often have their down payments invested in stocks, which have obviously been severely negatively affected in recent weeks. Will that force some people out of the market?
- What will happen to interest rates? The Canadian government has slashed interest rates twice in the last month, as a direct response to the COVID crisis. Will low rates continue? And at what price?
- Will financing a home get easier or harder? Easy access to money and borrowing has long been one of the drivers of Toronto’s real estate market. How far will the CMHC and the federal government go to stimulate the economy through generous lending practices? We’re already seeing a tightening of the secondary mortgage market, private lending, bridge financing and home equity lines of credit – will that money flow again in the future?
- How many brokerages and REALTORS will there be to service Buyers and Sellers when this is over? Before COVID, we had 55,000+ real estate agents in the GTA selling 110,000 homes a year. Most agents and brokerages don’t currently qualify for the Canada Emergency Response Benefit or wage subsidy program and, combined with high expenses, slim margins and a long sales-to-pay cycle, they’re already struggling. How many will exit the industry?
- Will First Time Buyers be actively looking to buy in a post-COVID world? Toronto’s real estate market has historically been supported by first-time Buyers (who themselves, are supported by parents who help fund the downpayment). How will they be affected? Will this bring about an opportunity for them to enter the market?
- How will Toronto’s immigration be impacted? How long will international borders be closed and travel remain at a stand-still? How will Canadian immigration policies affect the number of new people moving to Toronto? It’s estimated 450,000 people won’t be able to complete their plans to immigrate to Canada over the next 6 months. (Source: Sobering Outlook but COVID-19 Has an End Game)
- What will happen to real estate prices in Toronto? Last, but certainly not least: what will happen to home prices in a post-COVID world? Will we see a small dip in prices and a fast recovery as many are predicting? Will the pent-up Buyer demand drive prices up even more when things begin to return to normal? Or will we find ourselves in a prolonged recession?
What’s the one thing real estate markets hate? Uncertainty. And there’s a lot of uncertainty right now. Here’s what we do know:
- There was a ton of pent-up demand before the COVID-19 crisis hit, and there will be new real estate needs created by new life transitions too
- Toronto is an awesome city full of awesome people
- Shelter is a basic human need, and there will always be people who need to buy and sell.
I wish we had the answers and could predict the future. But until we do, we’ll stay home and stay safe. We hope you will too.