The Changing Market – COVID’s Impact On Buyers And Sellers

Fair warning this week, as we’re a little data and stats heavy, but don’t dismay. There is a ton of interesting and useful information if you can tolerate the nerdy approach.

How can we gauge how COVID has impacted those looking to trade in real estate? The Ontario Real Estate Association (OREA) partnered with Nanos Research to give it a shot. They surveyed those actively in the real estate market to get a glimpse of what consumers are thinking. The criteria included people who are planning on buying and/or selling in next two years. You’d think after all the 2020 surprises nothing would catch me off guard, but lo and behold, here are some unexpected survey results.

I know this type of information may seem irrelevant to you and other non-realtors. However, if you’re interested in buying or selling in the next few years, let me explain how it can be useful. If you’re looking to buy, you’re going to be impacted by your local competition and supply. If you know what other buyers and sellers are thinking and planning, then you can adjust your strategy accordingly, or at least prepare. Conversely, if you’re looking to sell, then it can be extremely useful to know what potential buyers are looking for and then you can cater your property improvements and marketing towards their ideal.

Let’s start with location. 61% say living in rural areas appeals to them more now than pre-pandemic, and 61% also feel this way about living in the suburbs. Given that we were locked inside for so long, it’s no shocker that people are craving more space and larger yards. I was surprised to see that a third of Ontarians (34%) feel that living in a downtown setting is more appealing than pre-pandemic. Perhaps access to resources, health care, and having walkable shopping has become more of a priority for these folks. In general, it looks like we might see a shift away from cities, at least in the short-term. Depending on how far away people move, a few winters without their usual comforts may result in a change of heart.

Now what about the actual home? I was really expecting that the vast majority of people would now be looking for larger or different homes. Maybe new layouts to accommodate so much more time at home, combined with working from home. But I was wrong. The vast majority (69%) say that being in isolation with COVID has not changed their view of what they want in a home! January to July they still want the same type of home. I have to say anecdotally this is not what I’m hearing from clients, but these are the stats. Only 31% have changed what they are looking for, most often wanting more space, more outdoor space, etc.

I think the question I’m asked about most often when it comes to real estate is about the future of prices. It’s an interesting question because while I have a lot of exposure to what’s happening in the market now, there’s no way to predict with accuracy where things are going. Even the most seasoned economists and real estate analysts are making educated guesses at the future. I often hear people predict the fall of prices so it was interesting to see that 42% of those surveyed with OREA think prices will actually somewhat increase post-pandemic. 6 out of 10 think buying a home is still a very good or good investment. This indicates to me a fair amount of consumer confidence in the market, and that real estate is an asset.

The major financial institutions in Canada (and definitely the CMHC – Canadian Mortgage and Housing Corporation) have all predicted prices softening. With access to statistics, data galore, and some brilliant analytic minds (depending on the institution), they estimate Canadian home prices will drop 5%-20%. These are pre-June market stats and no one has changed their tune at this point despite continuing strong numbers year-over-year. The data on income level, locations, and housing types that have been most impacted by mortgage deferrals have not be made widely available. For this reason, it’s so hard to know what awaits when CERB and deferral support programs cease.

Here’s what we do know about people actively in the market who were surveyed: 76% of home owners were not participating in mortgage deferral, 10% were participating, and the rest were planning to use the program at some point or are unsure. When asked about employment, 32% reported no change in their job, 32% now working from home, 20% have less income due to reduced hours, and 17% lost their job or were temporary laid-off (more detail here would have been very useful). While these numbers do indicate COVID’s impact, they aren’t devastating, but we shall see what the future holds. At this point, those with investments in Canada’s real estate market have been pleasantly surprised at its resiliency.

Finishing on a lighter note, here are just a few stats about how people are shopping for property in this strange new world we find ourselves in. 4 in 10 were open or somewhat open to buying virtually (this means buying a property based on a virtual tour or videos instead of going in-person). This was more common with younger millennial-aged buyers than other age groups. More than half of those already in the market reported that they are now less likely to buy a second property. And finally, the majority (84%) of those looking to purchase would be comfortable or somewhat comfortable with in-person private viewings; 66% felt the same level of comfort with open houses.

As a side note: with Stage 3 starting, open houses can now resume if your brokerage allows.

Thanks for hanging in there and as always, if you have any questions, concerns, or comments let me know. If you are looking to do a dual transaction – buying and selling in the next year or two, check out my blog on the best strategy.

Photo by engin akyurt on Unsplash