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These are crazy days we’re living in right now Toronto. Although the threat of COVID-19 has been around since back in December, many people viewed it as nothing more than a flu strain that would never reach them. Flash forward to March, and Toronto’s in a state of emergency and Canada has shut down its borders to almost everyone other than residents and U.S. citizens.

This is one of those moments we’ve got to take a deep breath and be determined to keep calm and carry on.

While small businesses try to brace themselves for the impact, the Toronto real estate market might be in for some potential surprises depending on how long the virus continues to spread.

So just what can happen? Will it actually impact the Toronto real estate market? Is it something you should be worrying about? Here’s our take on the situation, and our thoughts on three unexpected ways COVID-19 can impact Toronto real estate.

1. Bank Rates and Mortgages

According to Bank of Canada Governor Stephen Poloz, lower interest rates won’t directly impact housing prices. However, what the drop might do is inspire consumer confidence at a time when consumers are running scared because of the coronavirus. Since the virus is expected to cause declines in confidence, affordable loans with lower interest rates can help mitigate fears. 

If consumer confidence continues to decline, so too could house sales. Poloz sees this as a good thing in that it will help stabilize what has been a rather frenzied market.

The drop has made variable rates more attractive, which could inspire homebuyers to take the leap even though times seem so uncertain right now. As well, the federal government was looking at making changes to the insured and uninsured mortgage stress tests to help make it easier for borrowers left out of the market. Unfortunately, those plans have been put on hold for the moment, and we’ll keep you updated when changes come your way. 

2. Investments and Real Estate

As investors are moving their investments to grade bonds, it’s causing fixed-term mortgage rates to drop. So, what we’re seeing is that the house prices people qualify for under the stress test are rising.

As a result, this could actually impact housing prices as more buyers mean less inventory, and more funding available for higher mortgages means buyers can make higher offers.

On the flip side, when the stock market doesn’t do well, it impacts consumers with investment portfolios. So, what’s an example of how this might affect the real estate market? Well, if less parents are willing to invest in their kids’ down payments because they feel they’ve lost too much in the stock market, it will make it harder for younger people to buy homes. Or, some people will be worried about their investments and might opt to access their home equity via a HELOC instead of selling, keeping inventory low. 

Another interesting impact could be on real estate investment trusts (REITs). These investments have been the go-to for investors looking to add a stable investment to their portfolios. They’re the tried and true investment that tend to run the course and hold up well thanks to their diversity.

However, if people have invested in REITs focused on properties such as casinos or hotels, they could see some drastic issues as many of these companies face challenges due to travel bans. In fact, travel bans are also impacting the little guys as Airbnbers were already seeing cancellations due to travel bans.

As things worsen, they will lose an income stream that will greatly impact their lives. In theory this could lead to short-term landlords considering either selling their condos or resorting to long-term rentals. These are both potentially good things for affordable housing options in Toronto.  

3. Social Distancing

While interest rates could attract more buyers, social distancing is keeping them from shopping for a home. Sellers won’t be willing to let people into their homes, and buyers will be reluctant to take the risk of doing the open house circuit.

Social distancing will also have a very dire effect on local businesses who’ve been forced to shut their doors in an effort to “flatten the curve.” While restaurants are still allowed to offer takeout and delivery, small boutiques will continue to see drops in sales, as will bars who don’t offer food so have to shut down completely.

The longer this lasts the more chance there is for trendy neighbourhoods to lose some of their hottest assets like the charming cafés, bistros, bars, restaurants and boutiques that help attract home buyers.

Of course, this is getting a little ahead of ourselves, but you can see how this downward trend can affect local neighbourhoods. 

Loss of jobs or at least lost wages resulting from COVID-19 shutdowns will make incomes more vulnerable, which could lead to less people being able to apply for mortgages. In fact, lenders might be wary of applicants from certain industries impacted by the virus such as travel and oil. 

Bottom Line

So, as we hunker down for the long haul and try to outsmart the COVID-19 virus, what can buyers and sellers do?

Buyers should be cautious and not underestimate COVID-19’s negative impacts on the economy, jobs and buyers’ sentiment. You’ll want to avoid overspending and getting further into debt when things are so unsettled.

Sellers on the other hand might look at this as the time to make a move to either cash out or downsize.

It has to be done now, as inventory will be limited and you can still attract buyers not shying away from the market. Those able to take advantage of lower interest rates and being able to beat the stress test will be more likely to be tempted to shop. If you’ve got a high demand home of good quality, you’ll beat out the competition. When the price is right, accept the offer and be confident knowing you made the right choice. 

One further word of advice: Be kind to your neighbours and remember: we’re all in this together. Buy only what you need, wash your hands and follow cough and sneeze etiquette rules and look out for your elderly neighbours. Stay healthy Toronto. 

Our kickass team can help navigate the Toronto real estate market during these uncertain times. Reach out to us today by calling #416-291-7372. We’re still here for you! 

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