May 6, 2020 | sellers
Right now we still have significant restrictions, whether you’re a buyer or seller of Toronto real estate. Because of this, you’re #1 priority should be to stay safe and limit your exposure to Covid-19. That said, these restrictions are being eased in phases. Toronto is beginning to slowly moving out of quarantine. The Covid-19 virus will still be with us, but hopefully at a much more manageable level. We will cautiously return to more buying and selling of real estate, but we will still have the Covid-19 virus among us to some degree. So, we’ll learn to live with it as best we can until a vaccine is found or the virus runs its course. I know… It’s not ideal. Our job is to try to get a little closer a normal life without triggering another quarantine or a second wave.
This is the time frame I would like to talk about – this next phase. A time when the quarantine restrictions will be eased and we’ll be able to sell properties more easily, more people will return to work, but we’ll all still have to practice safety protocols.
Since Covid-19 became a serious threat here, sellers and buyers alike have stepped to the sidelines. We had a very fast-paced market in February of this year. I even pondered in an earlier blog whether the real estate market in February 2020 felt like the start of 2017 – double digit, year over year price increases in Toronto, and many bidding wars. Definitely a seller’s market.
Covid-19 changed that. It’s not that this pandemic plunged the market into chaos, but it certainly changed the market’s trajectory. Real estate transactions are way down during the quarantine. The priority has been to stay home. Even with the very few transactions taking place, the market prices in Toronto may have come down slightly, but prices have not plummeted. The most noticeable change: There is very little for sale right now. But what next for sellers? Where will the market go? That’s very difficult to say. On the one hand, you may have a quick recovery (date to be determined) once we get a handle on the spread of Covid-19 or a vaccine. On the other hand, if this crisis continues for a longer period of time, more people may be under more financial distress and be pushed to sell their real estate properties creating more supply in the market.
There is little data to go on, but here’s what we know so far. The lowest level of transactions in Toronto real estate have been the lowest in the last week of March and the first week of April. You can see this in the graphic provide by Broker Bay below. We see the transition week where offers on properties are slowing down in the third week of March. From the end of March until about mid April we see the lowest number of offers. What is interesting is that we begin to see a trend emerging at the end of April where offers are slowly beginning to increase. Still much fewer showings than February and most of March, but a small increase nonetheless.
Just keep in mind, this is not a normally functioning market by any stretch. It may give us a sense, however, that people do want to get back, albeit very slowly. This may change, however, depending on what direction our infection rate takes in the future.
With all that info, what is a seller to do once quarantine restrictions are lifted?
Well, here are my suggestions:
Although I rarely suggest we compare the Toronto market to another city, I make an exception here. British Columbia was able to flatten their curve sooner than Ontario. They will be loosening their restrictions on quarantine before us. Vancouver is a city that also had low inventory and a stronger market before Covid-19. So, it will be an interesting city to watch. In other words, Vancouver is going to get to a post-quarantine market before us. So, they may be able to give us a sense of what we could expect here in Toronto.
If you are uncertain of the post-quarantine market, and you don’t have to sell, then don’t jump in so quickly. It will be difficult to say what the market will look like after all this. We may have a quick recovery or a long one. And the one big unknown here is just how long Covid-19 will be among us, and just what direction the spread of the virus will take. As of now, I feel there is a growing demand to get back out there among buyers and sellers alike. If the infection rate stays down, we may see a significant bounce back this Summer or even June. In other words, our Spring market will happen in the Fall.
But any thing can happen. There may be a reluctance for sellers to sell right away because the market is still a mystery. This is similar to what happened when the market reset in 2017. Sellers didn’t rush to sell their Toronto properties. They just didn’t sell. So, in turn, the inventory stayed low, and the prices began to eventually move up again.
It is also possible that we may see more sellers who need to sell their properties. If the pandemic drags on long enough, this is a possibility. With a sustained economic drag on our economy, more people may need to sell. Still, it would take a long time for the inventory to build up in Toronto. In other words, inventory is so low, it would take awhile to reach the point where we tilt significantly into a buyer’s market. So, I think it would take a long time for this scenario to play out. At the end of the day, this virus has to end at some point. Whenever that is, the economy will improve.
IT’S NOT FEBRUARY 2020
The market in February 202o won’t be coming back as soon as we hit unpause. So, we may not see as many bidding wars. Prices MAY be down slightly. That seems to be the popular prediction right now among banks. I don’t think the market will crash. Underneath all of this shock to the real estate market is a very low supply of properties. It would take a lot of supply added to the Toronto real estate market before prices come down. Still, it won’t be the same market as we had before Covid-19. So, different strategies maybe required when selling. And on that note…
KNOW THY MARKET
If you do have to sell, know how your micro-market is performing. If prices are not rising and fewer people are viewing your property, then you’ll need a different marketing strategy. Different kinds of properties at different price points in different neighbourhoods may all be functioning very differently. So, pay attention to your micro-markets.
KNOW THY CONDO RULES
If you’re selling a condo property, you will need to find out if your building has restrictions on real estate salespeople and their clients coming to view the property. Some condos do have restrictions right now on who can come in the building. The loosening of your condos restrictions may not necessarily align with the loosening of the restrictions from Toronto or Ontario, though OREA is requesting that condos follow the rules set up by the Ontario government. So, check with management, and make sure you can have people go through the property. Most people need to physically see a property they want to buy. I don’t care how much some real estate agents try to sell a condo unit off of a virtual tour when buyers can’t get into a buildings, I would rarely recommend that someone buy any real estate without seeing it.
If you do want to sell, you should also be aware of the risks if Covid-19 may still be very present. You will need to sign-off that you are aware of the risks of selling your property during a pandemic, even if the dangers have been reduced. If you are living there, I would suggest you are not be there during the time you have the property on the market, if you can avoid it. You should still limit your contact with as many people as possible.
I try very hard not to use the word “unprecedented” these days. It’s not that I don’t like the word, but it does sound a little helpless. I fully agree where in a time where the future is uncertain, but let’s pay attention to the trends we see before us. If I had to venture a prediction, I think the Toronto real estate market should bounce back this year. Maybe not as soon as we’d all like. For sellers, they are very lucky that this happened during a robust time in the Toronto real estate market. Covid-19 didn’t exacerbate an existing problem.