7 Ways COVID-19 Is Affecting Canadian Real Estate Trends
7 Ways COVID-19 Is Affecting Canadian Real Estate Trends
How Is the Pandemic Shifting Trends in the Canadian Real Estate Market?
As COVID-19 continues to redefine our day-to-day lives, Canada is seeing major shifts in its real estate trends. These changes in property supply and demand are hardly surprising—as we take measures to curb the spread of the virus, we are changing the ways that we work, relocating to new-found locations, and working within new budgets.
As a result, demand for high-price city condos has fizzled over recent months, and buyers are flocking to suburban locales to enjoy larger living spaces. Meanwhile, Canada’s once-rich immigration channels are drying up due to border restrictions, stunting housing demand from those who would otherwise emigrate to access Canada’s melting pot of social and economic opportunities.
7 Biggest Real Estate Trends that Canada is Experiencing at the Hands of COVID-19
1) Skyrocketing Summer Property Sales
The rapid spread of coronavirus forced the Canadian government to impose lockdown measures with little notice back in March—a high season for the real estate market. These sudden restrictions froze numerous property sales, leaving many buyers and sellers in the lurch. However, as the number of cases began to decline over summer, the government eased restrictions, allowing the real estate market to commence its catch-up.
With restrictions rolled back, Canada’s real estate market reached record-high activity between July and September, accommodating pent-up demand from those who were already in the moving process and those who decided to relocate from cities to rural areas. Despite the huge level of activity, we expect demand to return to average levels over upcoming months, especially when the government has rolled out the vaccine.
2) Decline In Demand for City Rentals
Thanks to COVID-19, the demand for rental accommodation in Canada’s largest cities is now in a sharp decline. Until this year, Toronto, Vancouver, and Montreal have offered hot-spots for rental accommodation, especially for those who can’t afford to buy in Canada’s most expensive cities. However, the pandemic has placed heavy financial pressures on tenants, who tend to earn less than homeowners and are often young people who are yet to climb the property ladder. Unfortunately, lower-income Canadians have been financially impacted most by the virus due to job losses, meaning that many can no longer afford high-price-tag rent.
Instead, many of these tenants are now opting for new, purpose-built rental and condo units. On top of this, prospective students who often rent city condos near their educational institutions are now more likely to opt for online study courses. As demand shifts and real estate trends evolve, we are likely to see rises in rural property prices and declines in city condo prices over the next few months.
3) Rise In City Condos for Sale
As rental vacancies rise, there is now a continuous flow of listings in Toronto, Vancouver, and Montreal. In particular, the introduction of strict regulations in Toronto has pushed many locals to sell their condos. In September, the government announced that landlords could only rent out part of their primary residence on short-term rental websites. This policy aims to prevent people from purchasing and renting out several properties on rental sites. As of September 10, landlords looking to list an entire primary residence, or up to three rooms in their primary residence, must register with the city first. Landlords who plan to operate (or already operate) short-term rentals must register by the end of 2020.
Meanwhile, recent condo completions are bringing more units to Toronto and Vancouver, further expanding the number of empty city condos.
4) City Residents Relocating To Rural Areas
Over the last few months, some of Canada’s biggest cities have lost their magnetism. Having previously attracted huge numbers of buyers and tenants looking to live amid the bustle and sparkle of entertainment, thriving corporations, and the biggest attractions, cities no longer offer the excitement that so many crave. Instead, the pandemic has closed the doors on city work, social opportunities, and cultural life—at least for the foreseeable.
As virus cases skyrocket in dense cities, it’s no surprise that many Canadians are looking to relocate to suburban havens. While we can’t predict how long COVID-19’s impact on cities will last, working and studying from home are new norms for many, who now have little reason to pay steep prices for city accommodation. Not to mention the fact that many of these people have taken pay cuts, making affordable, spacious properties in rural areas even more desirable.
5) Drops In Mortgage Rates
Despite the many challenges associated with COVID-19, Canada’s overall housing market is seeing drops in mortgage rates, making homes more affordable for buyers. The reductions follow the Bank of Canada’s sudden rate cut, which is now almost zero, and sharp drops in bond yields mortgage rates, which are the lowest on record.
Aside from reduced mortgage payments, the government now offers income support packages for households most affected by the pandemic. On average, Canadian households received more funds from government aid programs in the second quarter of 2020 (totaling $56 billion) than they lost in wages because of the coronavirus (totaling $23 billion). As a result, household disposable income rose by 11% in Canada, rapidly expanding purchasing power for prospective home buyers.
6) Doors Closed on Immigration
COVID-19 has forced Canada to close its borders to immigrants—who offer much of the country’s housing demand. In the second quarter of 2020 alone, the number of new permanent residents dropped by 64%. Meanwhile, more non-permanent residents left Canada than moved to the country. This led to a devastating 94% collapse of Canada’s total net migration. Unfortunately, immigration levels are unlikely to rise any time soon. International students continue to study from home, and the border is set to remain closed except for essential travel until Canada and other countries have achieved successful vaccine protection.
However, when Canada is able to welcome immigrants back, we are likely to revert to swift-rising housing demand throughout the country. Storey Collective has examined the government’s predictions for Ontario’s growing population over the next three decades and explained the new infrastructure that we will require to accommodate rising migration levels in this blog post: The Invisible Housing Demand of Canada’s Growing Population.
7) Rise In Mortgage Deferrals
Amongst these real estate trends, COVID-19 presents a wealth of unknowns. As unemployment rates accelerated to new highs in spring, around 780,000 people opted to defer their mortgage payments, representing 16% of mortgages in bank portfolios. Most mortgage holders reverted to their usual payments at the end of August, but the future of employment is still unstable for many Canadians. With salaries at risk, the housing market is also likely to see many households downsizing over the next few months.
Seek Professional Advice on COVID-19 Real Estate Trends
If you’re thinking about buying or selling a property during this turbulent time, you’ll likely have some questions about how and when you should move forward. The challenges surrounding buying and selling property are now more complex than ever, and it’s important to seek all necessary information about current real estate trends before you begin. Storey Collective’s real estate agents can put your mind at ease with a free, no-obligation call.