To say this is a tumultuous time in Canadian real estate and for all the people who’s livelihood is tied to it would be a gig understatement. There’s no debating the fact that the market is depressed, and the market is neither a buyer’s or a seller’s one, and that has nothing to do with metrics. It’s probably one of the strangest times to be a realtor in Canada ever, but it shouldn’t necessarily be regarded as one of the most concerting times.
Now of course that is going to be dependent on WHERE you are practicing real estate in the country, and it is true that some markets are going to be more insulated against the tumult than others at this time. One thing that is going to be for certain is that there is going to be less of the pie to go around, if we’re to look at it metaphorically and of course all of you will know exactly what that means.
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It’s important to keep an open mind during this time, and that means not leaning too far towards pessimism OR optimism regarding what’s to come in the near future for real estate professionals across the country. With that mindset, let’s offer some perspective on all of this and hopefully put some of you more at ease.
Let’s start with a look at the residential housing market in the nation’s capital, Ottawa. The Ottawa Real Estate Board showed a sharp decline in listings for April; 913 properties sold through the MLS system, a massive drop from the 2,025 sold in April 2019.
Now while that’s in line with the doom n’ gloom way of thinking, let’s consider as well that average selling prices were actually up, 6.3% for condos and 6.8% for detached single-family dwellings. On the year-to-date, average selling prices are up a quite 15.1 and 18.5%, and those are fairly robust gains obviously.
Price gains of this sort will suggest a strong market, so what is one to make of all this?
Any economics course will make clear that price is going to be a function of supply and demand. Now if the two curves remain in balance, price stability is maintained. A shift in one without a shift in the other will result in prices changing.
Balance of Supply and Demand
What we do know is what has happened since the middle of March is that both curves shifted to the left, and did so pretty much entirely at the same time. Quantity went down, but prices didn’t go down with them. In fact, they actually showed measurable increases.
The reason residential real estate prices in Ottawa remained stable is because the fewer buyers are being matched by fewer properties on the market.
A sufficient number sellers – even if not an ideal number – balanced with enough active buyers makes it so that selling prices can be maintained and even track upwards in best scenarios.
This tends to be the case in most major metropolitan regions of the country. While the overall level of activity is down, the market as a whole remains in balance for the most part. Yes, a significant number of sellers have decided to wait and not offer their houses for sale, but that is countered by the number of willing buyers be temporarily down as well.
No one’s going to argue that a large number of realtors are being affected right now due to reduced deal flow, but let’s at least give it a couple more months with the emerging data before we start making wide sweeping negative conclusions about the health of the real estate market.
Market Adaptations, Realtor Adaptations
Real estate agents are doing their own adjusting, and retooling the way they do real estate. They are finding new ways to market properties and provide options for viewings using technology such as live-streaming open houses, posting virtual tours, and holding virtual showings.
All of which will serve to address social distancing needs and people’s fears. In the bigger picture though the way Canada’s large urban housing markets will fare over the short to mid-term future will depend on the socio-economic makeup of the local population. This factor is a big one and really needs to be taken into account by realtors working in different parts of the country
Varied Local Impacts
It’s been said that Canada’s economy is currently ‘frozen’, and that’s a very appropriate way of looking at it. The ‘thaw’ then is going to be faster acting and more pronounced in certain areas as compared to others. In terms of resale housing activity in major markets, we can foresee that willingness to change is going to be key.
With commercial real estate it is really going to depend on what the medium- to long-term impact will be in terms of rents getting paid. Yes, the numbers of arrears in April is something to be concerned about, but businesses are beginning to reopen and that will be a positive factor.
Likely Only Down for a Bit
It’s true that some folks would like us to believe that the sky is falling in as far as real estate in Canada is concerned, but we don’t agree. This is a storm that can – and will – be weathered like many other storms that have come before it. Some businesses and sectors of our economy have suffered and will continue to do so. Many, however, will be successful in finding ways to adjust and carry on, and that will buoy the economy and buoy the faith that prospective home buyers and home sellers will have in the not so distant future.
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