COVID-19 has changed the way Canadians shop for homes and that may not change, says Phil Soper, president and CEO of Royal LePage.
“The impact of COVID-19 on the Canadian economy has been swift and violent, with layoffs driving high levels of unemployment across the country. While is it sad that these people skewed strongly to young and to part-time workers, for the housing industry, the impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate,” says Soper. “From our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020. Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.
“It is easy to mistakenly equate a handful of transactions at lower prices to a reset in the value of the nation’s housing stock. Distressed sales that occur during an economic crisis are a poor proxy for real estate values.”
The Royal LePage House Price Survey and Market Survey Forecast released this week says the aggregate price of a home in Canada is expected to remain remarkably stable through the COVID-19 pandemic.
“If the strict, stay-at-home restrictions characterizing the fight against COVID-19 are eased during the second quarter, prices are expected to end 2020 relatively flat, with the aggregate value of a Canadian home up a modest one percent year over year, to $653,800,” says Soper. “If the current tight restrictions on personal movement are sustained through the summer, the negative economic impact is expected to drive home prices down by three percent to $627,900.
“In December 2019, Royal LePage forecast the national aggregate price to increase 3.2 percent by the end of 2020. Due to COVID-19, expected price growth has been revised down almost 70 percent compared to Royal LePage’s base scenario.”
The market will return looking different, says Soper.
“As we ease out of strict stay-at-home regimens, sales volumes will return; traditional home sales practices will not,” he says. “The popular open house gathering of buyers on a spring afternoon is gone, and it won’t be coming back any time soon. The industry is leveraging technologies that allow a home to be shown remotely and social distancing protocols, where we restrict client interaction with our realtors to limited one-on-one or two meetings, will continue for months and months. This process is inherently safer than a trip to the grocery store.”
Soper presents two scenarios
• “If the fight against the coronavirus requires today’s tight stay-at-home mandates to remain in place for several months more, with no semblance of normal business activity allowed, temporary job losses will become permanent and consumer confidence will be harder to repair,” he says. “This would place downward pressure on both home sales volumes and prices.”
• “Equally, if the collective efforts of Canadians slow the spread of the disease to manageable levels, and if promising science and therapeutic drugs are announced, people will return to their jobs, market confidence will bounce back quickly, and we could see Canada’s real markets roar back to life, with 2020 transactions delayed but not eliminated.”