As the coronavirus pandemic unfolds, it continues to change the way people work and live. The outcomes of the situation have affected Toronto real estate and surrounding areas. Due to the market lag effect we likely won’t know how much the market will be affected until further down the line.
The real estate industry is considered an essential service by the Canadian government. Therefore, agents continue to guide buyers and sellers through their real estate journey, limiting and even eliminating in-person meetings. Here’s what we know is happening in the Toronto real estate market currently:
Market activity during coronavirus pandemic
February and early March showed signs that the Toronto housing market would continue to see growth and typical spring home-buying activity.
Population growth and low unemployment rates at the time were contributing to an active market. It seemed buyers were still drawn to single-family homes in the GTA, with year-over-year sales growth and listings on the incline.
However, unprecedented circumstances mid-way through March due to coronavirus are expected to cause a shift in trajectory.
According to the Toronto Regional Real Estate Board (TRREB) sales reached 8,012 home sales through March 2020 which is up 12.3 per cent compared to 7,132 sales in March 2019.
Average home prices are high in this city, sitting at $987,787 for Toronto proper in March. Yet, average selling price in March remains above last year’s average, which indicates demand for homeownership is persistent.
This data suggests that there is market activity, but it is also evident that the number of sales in the second half of March was impacted by coronavirus.
With measures such as social distancing and non-essential business closures, home searching may slow down to a degree as more people take precautions and follow social distancing bylaws.
This does not mean that the market will come to a complete halt. Despite these challenges, there will always be a need to purchase or sell a home, such as those experiencing divorce, are in the middle of an estate sale, and other circumstances. There are important reasons why the real estate industry will continue to operate and support the Toronto market.
The Canadian government is taking steps to help businesses reduce layoffs and keep employees on the payroll. For those with job security and a down payment ready, the effects of the virus won’t be an obstacle to entering the market.
A potential slowdown of bidding wars
New immigrants and family formations have contributed to rising housing demand in Toronto. Supply and demand play an important role in the state of real estate markets. Low inventories and a shortage of listings in the city often spur bidding wars between homebuyers. This can make it more difficult for buyers to enter the market, as competing offers are a common occurrence due to tight market conditions.
Yet, recent shifts could discourage people from listing their homes in the short-term, with fear of not getting the best price under current conditions. While homebuyers may take a wait-and-see approach for when the market recovers. If sellers hang in there, less competition could make this a prime time to purchase a home.
However, buyers and sellers may be surprised at how easily consumers are embracing technology to continue activity in this market. Having open houses may not be necessary, since agents can leverage online 360-degree virtual listings, panoramic images and floor plans to give the buyer the experience of an open house without being there in person.
To stay connected to your real estate agent, apps and video calling services help maintain open lines of communication.
Leverage low interest rates
As a result of the coronavirus pandemic, the Bank of Canada has reduced its benchmark interest rate to 0.25 per cent from 1.25 per cent. This is the lowest the rate has ever been.
A recent announcement to ease the mortgage stress test to give buyers more purchasing power was put on hold due to the pandemic. However, assuming the change eventually comes into play, the new stress test would factor in actual mortgage rates rather than the current posted rate system.
The good news is that this could be the perfect time to enter the market and purchase a home. Now that mortgage rates are lower, buyers can borrow more money at a decreased interest rate making their mortgage payments more affordable.
Another benefit is that homebuyers will have more housing options to choose from. Since they can qualify for more financing, it can be used to purchase a home with more of the features they desire.
First-time buyers also have the advantage of not having to sell a property in order to access the equity required to purchase a new home.
With interest rates at an all-time low, this can be considered a good time to purchase a home. Yet, the challenge will be for real estate agents to facilitate home-buying activity during this time. Here are some strategic ways the Canadian real estate market can continue during coronavirus.
Toronto real estate continues to experience housing market activity. While the coronavirus pandemic may affect the market in the short-term, we expect it to rebound when social distancing measures loosen, and we return to some normalcy. For now, it is important to take necessary precautions while participating in the market during your home-buying or selling journey to maintain health and safety.
Does a spouse's real estate ownership cancel out first-time homebuyer qualifications? – MoneySense
Q. My husband and I married recently, and we have lived together in a rental apartment since we got engaged and married. He has a condo, which he purchased seven years ago, but he has not lived there for the past three years. I’ve never lived in that condo and he didn’t use the Home Buyers’ Plan to purchase it. If we were to purchase a property together, to live in as our matrimonial home:
- Am I eligible to use first-time homebuyer programs? How about my husband?
- If I am eligible, but my husband is not, can I buy a joint property and I still use first-time homebuyer benefits?
A. There are a few first-time home buyer incentives from the federal and provincial governments. The Home Buyers’ Plan (HBP) allows a withdrawal of up to $35,000 from your Registered Retirement Savings Plan (RRSP) to use towards the purchase of a qualifying home. Both spouses can utilize the $35,000 limit if they qualify.
And to qualify, you must be a first-time home buyer, meaning you did not occupy a home that you or your spouse owned in the four years prior to buying a home. Since you never lived in your husband’s condo, you should qualify. Given he has not lived there for the past three years, he will qualify once he gets to the fourth year of not living in the condo.
To clarify, if you bought a new home in 2020, he would need to have not lived in the condo he owns after January 1, 2016. If he lived in the home in 2017, he may not qualify as a first-time home buyer until January 1, 2022.
There is a federal Home Buyers’ Amount that you may both be eligible for as well, Meredith. It uses the same four-year qualifying period as the HBP. The tax credit is $5,000, but the tax reduction or refund is only 15 % of that amount—so, $750. It is a non-refundable tax credit, so you must have tax owing in order to benefit from the tax savings.
Note that special rules may apply for both the HBP and Home Buyers’ Amount for persons with disabilities or people related to persons with disabilities.
The federal government also recently introduced a First-Time Home Buyer Incentive of up to 5% for resale homes, and up to 10% for newly constructed homes. However, in order to qualify, in addition to meeting the four-year ownership test, your annual income cannot exceed $120,000, and you cannot borrow more than four times your annual income.
Why office real estate landlords aren't panicking just yet – Financial Post
With tens of millions of employees working from home or laid off, the future of the workplace is now a primary concern for commercial landlords and tenants.
A recent report by Cushman & Wakefield (C&W) found that 73 per cent of workers would like their employers to adopt “some level of working from home.” Also, 90 per cent of employees believed their employers trusted them to work remotely.
But do these developments mean the end of “the office” as we know it? Not really. The report describes a new normal that will involve a “total workplace ecosystem” comprising more than a single destination and including a combination of virtual and physical places.
Critics of telework often argue that collaboration weakens when workers are confined to remote silos, but the C&W report suggests otherwise. It found collaborative work increased by 10 per cent with telework over the pre-COVID-19 period, with technological advances being credited for the big shift.
Roelof van Dijk of the CoStar Group sees two opposite forces simultaneously pushing and pulling on the demand for office real estate. On the one hand are the pandemic-related social distancing regulations that are behind the surge in working from home. As the number of workers, especially in the knowledge economy sector, continue to telework on most days, the demand for office space is likely to decline.
At the same time, social distancing regulations will require more space to be maintained between workers. The same floor space in the future will, therefore, hold fewer workers if they are spaced farther apart. Hence, even if a segment of employees continues to telework, spatial distancing measures requiring more space per employee should counteract the decline in demand.
In the short-term, landlords are unlikely to reduce rents drastically if the demand for office space decreases. It is also unlikely that office tenants will seek additional space if social distancing measures mandate more space per employee. Instead, tenants are likely to stagger schedules by having workers come in on alternating days or at different times, allowing tenants to maintain the same amount of space until their leases are up for renewal.
Office real estate markets present a mixed picture for demand today. According to data provided by CoStar Group, vacancy rates are exceptionally low in some parts of Canada, where the demand for office space is high, and the supply has not kept pace. While in other places, ominous signs of growing weakness are apparent.
CoStar data shows that office vacancy rates in Vancouver averaged 2.9 per cent in the first quarter of 2020, down from 3.3 per cent a year ago. While Vancouver’s office real estate market is tightening, Calgary’s shows increasing signs of weakness. Already, Calgary’s vacancy rate in the first quarter of 2019 at 14.4 per cent was more than four times that of Vancouver. That vacancy rate increased to 15.6 per cent in the second quarter. By comparison, Toronto’s office vacancy rate was around 4.4 per cent in Q1, down slightly from 4.7 per cent in the same period last year.
What may happen in the future depends on current local market conditions. For Canadian office markets as an aggregate, CoStar is forecasting an increase in vacancy rates from 6.2 per cent to 7.1 per cent a year from now. Local office markets present a mixed picture. Vacancy rates are expected to remain mostly unchanged in Vancouver and Edmonton but are expected to climb in Calgary and Toronto.
Commercial leases, unlike their residential counterparts, are of longer duration, often ranging from five to ten years. It may take up to a few years for most leases to go through renewal. A lot, therefore, depends upon the state of the economy in the near future. If local economies can shake off the pandemic blues sooner, one would expect growth in economic activity, an increase in hiring and a resulting increase in the demand for space, which may still be moderated by a higher prevalence of telework. If local labour markets fail to recover, and job losses become permanent, office markets are expected to struggle with or without telework.
Unlike landlords who hold retail real estate, office real estate owners are likely to fare better with rent collection. With malls closed during the pandemic, their tenants face massive cash-flow challenges, which compromises their ability to pay rents. The good news is that online retail sales are up for some retailers. The bad news for retail landlords is that a shift from brick-and-mortar retail to e-commerce would further lower the demand for retail real estate.
Whereas offices are also closed to employees except for essential workers, office work continues from home, thanks to telework. The business models of office-based firms are thus disrupted, but not discontinued. Hence, many office-based firms can conduct their business remotely and can meet their rent obligations.
A shift in demand for more modern and better-quality office space might also occur. Higher-end office real estate equipped with, for example, advanced HVAC systems and fast elevators, are more likely to adapt readily to social distancing requirements. In comparison, older B Class real estate may find it hard or prohibitively expensive to comply with regulations for improved ventilation and greater distancing between employees.
Telework may not be for everyone. The C&W report revealed that while younger cohorts, i.e., millennials and Gen Z workers, expressed the strongest desire for flex-work options, they found telework more challenging than older cohorts. Shared living arrangements, smaller dwellings, and a lack of dedicated space to work from home could be the reason for younger workers’ struggle with telework.
Real estate markets are in flux, and nothing about the future is known with certainty. Contingency planning based on probable future outcomes will allow smart landlords to cope with the changes heading their way. Waiting for a return to the old normal may not be a wise strategy.
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.
Alberta overhauls real estate regulator in wake of prior dysfunctional board – CBC.ca
Alberta is restructuring its real estate regulator, eight months after the government fired the previous board on the grounds it was irredeemably dysfunctional.
“Bill 20 … is the next step in the process to reform the governance of [the board] and to restore the faith of Albertans and the real estate industry in the real estate regulator,” Service Alberta Minister Nate Glubish said Wednesday prior to introducing the legislation in the house.
“The end result will be a new governance structure that will increase transparency, improve accountability and ultimately restore good governance to the real estate regulator.”
The Real Estate Council of Alberta licenses and regulates residential and commercial real estate agents and brokers, mortgage brokers, and property managers.
Lack of oversight, poor dealings
Last October, Glubish fired the existing board and appointed an interim administrator.
The move followed a third-party audit that reported the previous board had broken down, foundering under fractious interpersonal relationships and poor dealings with those in the industry.
The report outlined poor relations with the industry associations represented by the council and a tendency for members to spend 80 per cent of their time discussing governance issues, instead of considering the strategic and regulatory matters that are the reason for the council’s existence.
The KPMG report also found key committees were left empty, meetings were not held and there was a lack of oversight on spending.
‘Common sense regulation’
The bill would restructure the council overseen by a board of directors, with four new industry councils: residential real estate agents and brokers; commercial real estate agents and brokers and commercial property managers; mortgage brokers; and residential property managers and condominium managers.
These new industry councils would identify and address issues related to their parts of the real estate sector, setting standards and rules and determining licensing requirements.
There would also be a new dispute resolution process and board members and industry council members would not be allowed to sit on disciplinary hearings. Those hearings would be staffed by industry people or members of the public at large.
The council would also have to make public staff salaries and meeting minutes.
Greater openness and transparency standards will help rebuild eroded trust,”– Kristie Kruger
Condominium managers would be added to the groups overseen by the regulator while real estate appraisers would be removed, given they are self-regulated through their own industry association.
The Alberta Real Estate Association called the bill a critical first step towards reform.
“Refocusing the real estate regulator on common sense regulation will better protect the public and improve the real estate industry, while greater openness and transparency standards will help rebuild eroded trust,” Kristie Kruger, chairwoman of the association, said in a statement.
The association represents more than 10,000 realtors and 10 real estate boards.
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