COVID-19 and Toronto Real Estate

The last few weeks have been extremely stressful. As a self-employed person, my income relies on me bringing in new business constantly and it is hard to continue to be optimistic about Toronto Real Estate with everything going on around the world. There is no avoiding the onslaught of one bad news story after another. You can’t escape it right now and every day seems a little worse than the day before. I am so sick of the words Coronavirus and COVID-19! But, the current situation causes people to have legitimate concerns about the future. Will I have a job? Will I remain healthy? Will I be able to source food? Will my friends and family be ok? Will I be able to make payments on my home?

There is no denying at this point that the spread of COVID-19 could have a major impact on the Toronto Real Estate Market, but to what extent is still very much unknown. I wish I had a crystal ball and could tell you exactly how this will all play out, but if I had one of those, I would probably be sitting on a beach somewhere much warmer right now. I have always been the kind of person who hopes for the best but prepares for the worst and this is the same approach I am taking at this time with regards to real estate and my clients.

That being said I wanted to put together a post highlighting some of the risks in the market now, how things could play out and how I would proceed as a buyer or seller right now.

Optimistic Scenario For The Toronto Real Estate Market

I have been very happy with the response from the Canadian Government so far and am optimistic that these attempts to curb the spread and add an element of social distancing will slow down the spread of COVID-19. If this is the case I expect we will see some hesitation in the market over the next month or two, but overall pricing will remain unaffected and could potentially drive more demand to the market with the current interest rates and our low Canadian Dollar. I believe the Canadian & US Government will continue to do everything within their powers to prevent the economic markets from crashing beyond the damage which has already been done. In this case I see markets bouncing back relatively quickly and we are back to bidding wars in no time. Given how China has been able to curb the spread to manageable decreasing numbers is a sign that this can be beaten.

Biggest Concerns For The Toronto Real Estate Market Right Now

  1. Job Loss – Jobs will be lost and layoffs have already begun. If you can’t open your doors to the public it is hard for many companies to make money. Just ask anyone in travel, retail, There will likely be some rebalancing in the labour market to correct for this in industries which have seen significant demand increases though so hopefully the number of jobs lost doesn’t go too high as this could lead to forcing many to sell. I believe this will be contained within 60-90 days and these people can be rehired when the spread of the COVID-19 has been contained.
  2. Very Recent Sales – If you bought within the last 4 weeks, it hasn’t closed and you bid some crazy amount for your property, get your mortgage ASAP. Hope that your property appraises, you can get a moving company to move in, and that you still have a job to satisfy the conditions of your mortgage approval. I really hope your realtor encouraged a LARGE deposit along with a shorter close if you did sell recently because some buyers might just walk away.
  3. Private Mortgages / Pre-Construction – Today Ron Butler, a well-respected mortgage professional of Butler Mortgage, tweeted: “The Day Private Mortgages Died (for now)“, indicating getting private money is about to get a lot tougher. This concerns me because in April of 2018 Urbanation released a study that roughly 10% of all transactions for pre-construction used private lenders. I suspect that 10% has risen since and if 10% of purchasers can’t close and prices come down from now they will likely have to walk away from their down-payments potentially increasing supply volumes. While most buyers are well ahead if they bought over a year or two ago and will figure out something to make things work there still is a risk if market growth begins to slow over the next few years. I warned many times about the risks of pre-construction and the rents that the developers were promising and I think it will take this city much longer to get to the $7/sqft levels that some developers were promoting last year.
  4. Buyer and Seller Fears – I expect we will see a significant drop in the number of showings over the coming weeks as more people begin to self-quarantine. Furthermore, Seller’s may not want a bunch of strangers coming through their homes and decide to hold off on selling for some time creating somewhat of a standstill in the market.
  5. Panic Selling – Some investors may decide that they don’t want to hold that cashflow negative investment that they purchased a few years ago and decide it is best to pull out for now til things settle down. I think this will take at least a few months to play out but it is a possibility, but could also be a buying opportunity for buyers if they can get a good deal.

How I Am Advising My Buyers Right Now

Given the uncertainty buyers should proceed with caution and look for good deals right now. Walk away from the bidding wars where prices are going to the moon. See how things play out over the next week and act accordingly.

Some things you should be considering: 
– Is your job relatively secure?
– Has your industry been greatly impacted by COVID-19?
– Are you buying for the long term or speculating?

How I Am Advising Seller’s Right Now

The window of opportunity to get your place on the market before most buyers go into complete social isolation from Coronavirus is almost closed and if you are thinking about selling I would seriously consider holding off right now. I suspect some buyers will likely start to pause searching until things cool down and have noticed the amount of offers on places has started to fall which means you have likely missed the spring peak in the market for now but if the optimistic scenario above plays out then it should return to normal. If you have to sell then that is what you have to do but if the buyer pool decreases you may need to lower your pricing expectations somewhat. Whatever you do, don’t panic think about your options and make a rational decision. There are marketing techniques which all Realtors should be implementing in times like this such as 3D Virtual Tours, Amazing Photography, Video, Drone Photography, etc. to help buyers who may not want to take chances seeing as many properties in person so ensure you are hiring a realtor who is taking this into consideration.

Here are some things to consider:
– Do you have to sell or are the reasons for selling due to panic?
– Is the reason for selling a major downsize such as retirement where you are hoping to bank some money?
– Where are you going to move to?
– Is my property in a segment of the market that has seen recent extreme growth?

Seek Professional Advice

Timing a market is one of the worst things you can do. I suggest having a Realtor who you can be in close contact with over the coming weeks as the news changes daily especially if you are thinking about making a move in the next year. I would be happy to discuss your personal situation with you if you don’t already have someone. One day we will all look back on this hopefully together over a beer or coffee so please stay safe, take care of yourself, wash your hands and don’t hoard the toilet paper ;)