To help stop the spread of COVID-19, the Ontario government has extended the Declaration of Emergency to May 12, 2020. This extension will enable the government to continue protecting the health and safety of the people in Ontario.
Emergency orders that have been put in place to-date under s.7.0.2 (4) of the Emergency Management and Civil Protection Act, have been extended until May 6, 2020. This includes the closure of child care centres, outdoor amenities in parks and recreational areas, non-essential workplaces, public places and bars and restaurants, along with restrictions on social gatherings and the prohibition of price gouging.
All publicly-funded schools will remain closed until at least May 31, 2020. Additionally, Ontario’s provincial parks and conservation reserves will also be closed until May 31, 2020.
REAL ESTATE MARKET UPDATE – AS OF MAY 1ST
Toronto Regional Real Estate Board is reporting results for the first 17 days of April 2020, in order to provide some guidance on the impact of COVID-19 on the Greater Toronto Area housing market:
- Greater Toronto Area REALTORS® reported 1,654 home sales through TRREB’s MLS® System during the first 17 days of April – down by 69 percent compared to the same period in 2019.
- The number of new listings was down on a year-over-year basis by a similar annual rate, declining by 63.7 percent to 3,843.
- The average selling price for sales reported during the first 17 days of April 2020 was $819,665 – down by 1.5 percent compared to the same period in 2019.
“The state of emergency measures currently in place, including the necessary enforcement of social distancing, has impacted the real estate market in many ways. Home buyers and sellers have concerns about the economy and indeed their own employment situations. On top of this, many buyers and sellers are avoiding any type of in-person interaction.
All of the COVID-19 related issues and measures have translated into a temporary drop in the number of transactions – a drop that will persist until we experience a meaningful and sustained decline in the number of cases. However, once recovery begins, it will likely accelerate in earnest as buyers seek to satisfy pent- up demand that will build up over the course of the spring and at least part of the summer,” said TRREB’s President, Michael Collins.
Looking forward, the decline in home sales will be likely strongest in Q2 2020, as strong social distancing measures remain in place for most of the spring. However, if public health forecasts assuming strong social distancing measures play out as expected, we will likely start to see improvement in market activity in the summer. Recovery will accelerate through the fall, as social distancing measures are substantially relaxed, a large number of people return to work from furlough and home buyers take advantage of very low borrowing costs that will remain in place to spur economic recovery.
The calendar year average price for 2020 will likely remain near the 2019 level, and will be buoyed by the 15 percent year-over-year growth experienced in Q1 2020 and resumed growth in Q4. Year-over-year declines in home prices could be reported during some months in the second and third quarters, but these declines will have less of an effect on the overall price for 2020 because the annual share of sales will also be much lower than normal.
“As we recover from this temporary downturn, potentially later this year, home buyers will move off the sidelines in increasing numbers as they satisfy pent-up demand for ownership housing. Increasingly, these buyers will be faced with the persistent lack of listings inventory that was a serious problem before the onset of COVID-19. As the different levels of government look toward recovery, it will be important for them to resume and build upon initiatives to bring a greater diversity of housing supply online,” said Jason Mercer, TRREB’s Chief Market Analyst.
Summary of TREB MLS® Sales and Average Price April 1 to 17, 2020
Sales Average Price New Listings Sales Average Price New Listings
(416) 588 885,371 1,381 1,940 919,788 3,460
(905) 1,066 783,422 2,462 3,403 782,628 7,135
GTA 1,654 819,665 3,843 5,343 832,430 10,595
POSSIBLE SUMMER RESURGENCE OF THE REAL ESTATE MARKET
Robert Hogue, Senior Economist at RBC expects “stronger activity to resume once social distancing orders are relaxed though there’s great uncertainty as to when this will happen.” In a zoom presentation for RLP Your Community today, he said that the baseline assumption for the economy to re-open is end of May, beginning of June.
In his housing update, Hogue indicated that the recovery of the Canadian real estate market will “crucially depend on the damage suffered by the labour market.” Canada lost over 1M jobs in March with 413,000 of those reported in Ontario. Unemployment numbers are expected to be released next Friday, May 8th and are anticipated to triple from February’s 5.2%.
What are the implications for real estate? Some businesses will not recover and consequently, some home buyers will not recover, due to loss of employment, hours or wages. The longer unemployment stays high, the slower the housing market recovery will be.
Is there any positive news? The exceptional start to the 2020 housing market should act as a buffer to absorb this type of shock. According to Hogue, “exceptionally low interest rates will help spur the recovery”. The Bank of Canada’s trendsetting interest rate currently sits at 0.25 percent, described as the lowest in a decade. The chance of home prices substantially dropping is low. “Despite the rough patch ahead, we expect property values to generally hold up.”