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We depend on keeping our local experts close, so that we always have an in on what is going on with the Toronto real estate market. As COVID-19 throws us all for a loop and we struggle to manage sheltering in place, we’ve had lots of questions from buyers, sellers and homeowners curious how the virus will affect Toronto real estate. So we reached out to our financial expert, Michael Sauter, a mortgage broker with The Mortgage Centre, who provided a very candid discussion about the COVID-19 situation.

Us: Has COVID-19 affected the real estate market yet?

Mike: Unlike the stock market, COVID-19 hasn’t affected the real estate market — at least, not in a negative way. Low supply and high demand have pushed up prices — particularly in the case of condos which are selling at all-time highs.

Us: What is the government doing if anything to help keep consumers calm?

Mike: To cushion the economic blow caused by COVID-19, central banks around the world have cut interest rates. Anyone with an existing variable mortgage, or someone looking to get one, can expect their borrowing costs to decrease. The Bank of Canada cut rates by a full percentage point since the beginning of March.

Us: What about the impact it’s had on the stock market?

Mike: We’re also seeing investors flee the stock market and park their money in investment grade bonds. A result of this flight to safety is that fixed-term mortgage rates are dropping. Lower mortgage rates increase the amount a home buyer can borrow, which pushes up prices as borrowers are able to make higher offers.

Us: Is there any sneakier ways the stock market could inadvertently impact the real estate market?

Mike: It was just over a month ago when stock markets were at an all-time high, largely due to the fear of missing out, whereas today it’s the opposite: many people are panic selling.

The same could happen, but to a lesser degree, with real estate, as buying psychology is fickle.

It’s important to also keep in mind that, since all financial markets are interconnected, a stock market drop should affect the housing market. For example, many new buyers turn to the bank of mom and dad to help with their down payment. However, after experiencing a drop in their investment portfolio many parents will be less inclined, or no longer able, to help their children fund a down payment.

Us: What about the potential loss of income for Torontonians caught off guard by business and service shutdowns in the city?

Yes, another important factor to consider is the potential loss of income that COVID-19 may cause. Some lenders might be hesitant to lend to applicants working in areas affected by the pandemic such as the travel or oil and gas industries.

Us: Can we still expect to see changes to the stress test the government promised?

Mike: We cannot forget about the mortgage stress test. On Feb. 18, the federal government announced that the hurdle rate of the stress test would be lowered effective April 6.  In anticipation of this change, many buyers re-entered the housing market, increasing demand on a real estate market with limited inventory.  However, as of last Friday, the Department of Finance announced that changes to the stress test have been put on hold.

Us: So, what should homeowners and buyers be doing, if anything?

Mike: All these factors are fueling the housing market and not even COVID-19 appears to be able to slow it down — yet.

If I were a buyer, I would be cautious. Don’t underestimate COVID-19’s negative impacts on the economy, jobs and buyers’ sentiment and avoid overstretching your budget — something that tends to happen when buying in a seller’s market.

My advice to sellers who are looking to cash out or downsize is to list their properties right away. Momentum is on your side and there is limited inventory, so sellers of quality homes are getting top dollar. The demand is currently high, but I wouldn’t be complacent and assume that it will last. If offered a reasonable price, I would take it.

So, there you have it. These are some things to consider as COVID-19 continues to keep Toronto down. However, as long as we stick together to tough things out, hopefully we’ll come out of this with very few scratches! Stay strong and 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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