British Columbia’s real estate market is bracing for a major hit from the COVID-19 pandemic, but experts are split on how serious the downturn will be.
The B.C. Real Estate Association is predicting the pandemic will cause an initial deep recession leading to sharp decline in home sales, but a rebound by next summer driven by pent-up demand if the pandemic has not dragged on too long.
The consequences of a major real estate slowdown could be pronounced.
The B.C. government’s 2020-2021 budget envisioned about $1.6 billion in revenue from the property transfer tax, and the real estate sector, which employs tens of thousands of people, is worth more than $22 billion annually to the province’s GDP, according to the industry non-profit, the Urban Development Institute.
Signs of trouble are already appearing in Metro Vancouver, which put up reasonably strong home sales in March that have since dropped off sharply — despite April traditionally being one of the hottest months of the year.
“I suspect you’ll probably see sales volumes for April down about 70 per cent from last year,” said Vancouver Realtor Steve Saretsky.
Real estate agents continue work with virtual tours and heightened safety measures
Economist Tom Davidoff with UBC’s Sauder School of Business said Metro Vancouver’s market had been building up to a strong spring after a several-year slump, when the pandemic hit.
While sales have slowed, he said prices have remained sticky — so far.
“Unlike the stock market, we haven’t seen panic-selling in the Vancouver real estate market, so prices have remained steady,” Davidoff said.
“Buyers have disappeared, sellers have disappeared, and the ratio of buyers to sellers hasn’t changed all that much.”
Further complicating the picture are the pandemic’s complex effects on industry financing.
Cameron McNeill, a partner with Vancouver real estate marketing firm MLA Canada Ltd., said that while construction is visibly continuing on existing projects, most of those units are already sold.
But he said a noticeable decrease in presale activity means developers won’t have the resources or the incentive to break ground on new projects, cutting off future supply.
The mortgage picture has also changed. The Bank of Canada has lowered its overnight lending rate, but banks have actually hiked rates on fixed-term mortgages.
Coronavirus: Okanagan real estate market braces for slowdown
Vancouver mortgage broker Sherlock Yam said the hikes reflect what banks see as growing risk in the housing market.
“They’re expecting that there will be a few defaults, and a few people that won’t be able to afford their mortgage payments after this pandemic and after that six-month deferral program,” said Yam.
About 20 per cent of his clients are investors sitting on the sidelines, he said, waiting for homeowners to panic.
“When people realize the end is not in sight, and this could last for a few months to a year, people will start to get a little worried,” he said.
“I know that there are investors waiting for that to happen, when they smell the blood they will start picking up some of those properties, but they’re just waiting.”
“It can’t slow down forever, because I think some people are going to have to sell,” he said.
“If we have a prolonged downturn in the economy, it’s very unlikely to me that people who have great businesses and are starved for cash aren’t going to find it attractive to sell a home to finance those other investments that are cash-short.”
Montreal’s real estate market goes up against COVID-19
McNeill, on the other hand, predicted a pricing trend more in line with the real estate association: A short-term slowdown with a rebound in 2021.
“There’s not going to be a buying opportunity. It’s going to be a patient time as the market returns to normal,” he said.
“In the medium- to the long-term, there’s going to be incredible forces still bringing population to the city, and we just don’t have the housing supply in order to be able to satisfy that need.
-With files from John Hua
© 2020 Global News, a division of Corus Entertainment Inc.
Toronto and Vancouver Real Estate Inventory May Get A Boost From AirBNB Slowdown – Better Dwelling
Canadian real estate markets may be getting another inventory headwind soon. National Bank of Canada (NBC) research estimates AirBNB hosts may contribute to oversupply later this year. As the slowdown impacts hosts, many may be incentivized to sell. By their estimates, just a quarter of hosts selling would cause inventory in cities like Toronto and Vancouver to swell.
AirBNB and Housing Inventory
AirBNB helps homeowners take existing housing stock and convert it to short-term rentals. Rather than staying in hotels, travelers can now stay in existing non-hotel stock. At first, it wasn’t a big issue when just a few people were doing it. As the platform expanded, people began buying additional housing just to operate short-term rentals. By repurposing housing that would otherwise be long-term units, cities now need additional housing. Basically, short-term rentals lead to an inventory squeeze, pushing rents and prices higher. Temporarily at least, for as long as the squeeze persists. That squeeze could end as quickly as travel did.
The Travel Industry Expects A Big Slowdown
The travel industry doesn’t expect travel to recover quickly from the pandemic. The US has approved some routes cutting plane traffic up to 90% until September. The IATA, the trade association for international airlines, also doesn’t see traffic returning to 2019 levels until at least 2023 – at the earliest. What does this mean? Fewer users of short-term rentals, and more competition from hotels for those travelers. All of this can have a big impact on real estate inventory, according to NBC numbers.
Canada’s Biggest Real Estate Markets May See Inventory Spike
If just a quarter of AirBNB inventory is sold off, NBC sees a lot more real estate listings on the market. In Vancouver, the bank estimates real estate listings would rise 12%. Montreal would see an increase of 27% in resale listings. Toronto is another story though, with inventory forecasted to rise a whopping 34%. That’s with just 25% of AirBNB exiting as hosts.
AirBNB Boost To Canadian Real Estate Inventory
The potential increase in real estate listings if 25% of AirBNB properties were listed for sale.
Source: National Bank of Canada, Better Dwelling.
The boost is another headwind for inventory rising later in the year. Inventory was already expected to rise in the coming few months. NBC economists believe this would be “exacerbating oversupply in the coming months.”
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How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio
In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.
Join Gerry every month as he updates you on The State of Real Estate
Watch the inaugural episode here:
May real estate sales in Powell River promising, says board president – My Powell River Now
Powell River’s real estate market is warming up.
Powell River/Sunshine Coast Real Estate Board president, Neil Frost, said May sales were “surprisingly good.”
“We were up significantly from April,” Frost said. “April was very poor, but of course that was obviously due to the pandemic and state of emergency declared in B.C.”
Frost said there were 23 residential sales plus two vacant land sales in the city last month, which is up from 11 total sales in April.
He added that those numbers are promising, especially in these uncertain times.
“March started out great and in the last half (of the month) really trailed off, and then April is where we’ve really felt the effects,” Frost said.
“May and June have already been very busy. Year-over-year, we’re looking at 41 sales for May 2019 and we had 23 for May 2020, and those are residential sales. Total sales for May 2020 was 25 total sales compared to 46 total sales for 2019.
While down from last year, Frost said 25 sales in a month is “pretty strong for our market.”
Affordability is helping to drive the market locally. Frost said the average home price is roughly $390,000.
“We’ve even seen some competing offers and property selling for over-list price,” Frost said.
The pandemic has changed the way realtors do their job, Frost said: “Worksafe BC has released a series of protocols and each office has also developed their protocols and basically, we’re trying to avoid in-person showings as much as possible.”
That said, serious buyers want to see a home in person before making the biggest purchase of their lives.
“We do take precautions, depending on the seller’s threshold,” Frost said. “Definitely sanitizing, and gloves, and facemasks if requested, (physical) distancing at all times, buyers are asked to keep their hands in their pockets and not touch anything in the homes, limit the number of people inside a home at a time. Really trying to restrict it to the serious buyers or the people that are going to be on title.”
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