House prices in Halton expected to stay high amid pandemic, survey says
While it's not clear what the real estate market will look like over the coming weeks and months, experts appear optimistic that the red-hot GTA housing market will weather the ongoing storm with aplomb—especially if physical distancing measures are relaxed sooner rather than later.
The recently-released Royal LePage house price survey predicts the aggregate price of a home in Canada will remain "remarkably stable" through the COVID-19 pandemic.
The survey says that if current stay-at-home restrictions 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 1 per cent year-over-year, to $653,800.
If restrictions persist through the summer, the negative economic impact is expected to drive home prices down by 3 per cent ($627,900) year-over-year.
In December 2019, Royal LePage predicted the national aggregate price would increase by 3.2 per cent by the end of 2020. Due to COVID-19, expected price growth has been revised down almost 70 per cent compared to Royal LePage's base scenario, the survey says.
That said, the country's persistent lack of housing inventory could be what saves the market from a violent tumble, as demand routinely outpaces supply in Canada and in the GTA in particular.
The survey also notes that those hit hardest by COVID-19-related job losses are less likely to be looking to buy homes in the near future.
"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," said Phil Soper, president and CEO, Royal LePage, in a statement.
"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."
Soper also says that while a temporary dip in prices is anticipated, there's no indication that prices will stay lower indefinitely.
"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 value," said Soper.
The survey says sales have plummeted in the wake of the pandemic.
According to the survey, home search activity on popular real estate websites is down more than 20 per cent versus norms. Royal LePage also says that home showings are down by more than two-thirds and that open house gatherings have been reduced to almost zero nationwide.
Soper says we could be seeing a shift in how people buy going forward.
"As we ease out of strict stay-at-home regimens, sales volumes will return; traditional home sales practices will not," Soper said.
"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."
The survey points out that the pandemic has certainly disrupted the market, especially since prices were climbing in the first quarter of the year.
As for what to expect in Oakville, Burlington, Milton and the GTA, a break from the heated bidding wars that characterized the market earlier this year has already been observed.
The survey says that during the first quarter of 2020, the GTA aggregate home price rose 7.5 per cent year-over-year to $866,211. The survey says the median price of a condominium saw the highest appreciation, rising 8.8 per cent year-over-year to $580,508. The median price of a two-storey home and bungalow rose 7.7 per cent and 3.7 per cent to $1,010,004 and $826,186, respectively.
“Toronto real estate appreciated rapidly in the first quarter as the demand that began in the second half of 2019 kept its momentum while inventory remained low. However, by mid-March both buyers and sellers had pulled back to adhere to social distancing measures and gauge the impact of the pandemic on the market,” said Kevin Somers, chief operating officer, Royal LePage Real Estate Services Limited, in the survey.
The survey says that if business activity resumes by the end of the second quarter, GTA home prices could increase by 1.5 per cent to $861,100.
If business activity resumes in late summer, the region could see a decrease of 0.5 per cent year-over-year to $844,200.
Soper says the market's recovery will depend quite heavily on how long physical distancing restrictions are in place.
"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," said Soper.
"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."
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