Canadian real estate markets hit hard by pandemic
Tough times are forecast after COVID-19 measures slow sales
Vancouver real estate agent David Hutchinson pulls out some bright blue medical gloves and tugs them onto his hands before entering a condo that's coming onto the market.
"It's uncharted territory, a completely different ballgame, and we're learning everything on the go," he said as he got his cellphone ready to do a virtual showing from the empty unit.
Welcome to selling real estate during a pandemic.
While Hutchison continues to work, albeit with adjustments, Canada's real estate industry appears to be heading into a deep freeze despite the warming spring weather. Though sales figures started off relatively strong in March in many parts of the country, they fell swiftly as the COVID-19 pandemic grew and stricter protective measures were put in place.
Greater Vancouver's real estate board, for example, released figures showing sales for the month overall were up 46 per cent compared to last March.
But by the end of the month, weekly statistics showed a dramatic slowdown, falling by about half compared to the first part of the month.
It was the same in Toronto, where home sales were up 49 per cent in the first 14 days of March compared to last year, but they plummeted by 16 per cent as the month closed.
Hutchison thinks April "is just going to fall off a cliff."
Toronto chartered accountant and real estate agent Scott Ingram agrees. He expects April sales to be "far below historical averages."
"Not in my time watching the Toronto real estate market have I seen sales slow right down as quickly as this," he wrote in an email exchange. "Not even back in April 2017, when the Ontario government brought in its Ontario Fair Housing Plan with the 15 per cent non-resident speculation tax," among other measures.
Lower prices predicted
Hutchison is worried values will fall along with the number of transactions.
"We don't know where prices are going to go. I mean, why would you buy something now if you perceive prices are going to go down in the future, which may very well be."
An April 3 report by RBC predicts housing sales could fall to a 20-year low, dropping 30 per cent over the coming year, and prices will indeed go down, in the short term at least.
With millions of people suddenly turning to financial aid from the government, personal finances that looked healthy a few months ago are suddenly shrouded in doubt.
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"In a matter of weeks or months, surging unemployment and the market's illiquidity will compel a growing number of tight-squeezed sellers to make price concessions," wrote RBC's Robert Hogue.
Legal headaches for buyers and landlords
Across Canada about 65,000 homes traded hands in the first two months of the year, and many of those sales are now closing in a completely different environment than when the deals were made.
Vancouver real estate lawyer Ken Pazder is already seeing the fallout.
He says some clients are wondering if they have to close on deals made before the pandemic.
He has to tell them that, under the law, a deal is still a deal.
"You're not going to be able to say 'I don't want to close because I've just lost my job, I don't want to close because my company is shutting down or I have to shut down my business.' That's not going to be a legal excuse that would fly in the courts."
In addition, his landlord clients are facing other legal issues, including tenants who suddenly aren't paying rent.
Further complicating the situation is so-called vacant possession — a legal obligation to ensure that a sold property is in a state fit to be occupied, which can include requiring tenants to vacate when the new owner takes possession.
A moratorium on evictions in B.C. means those provisions can't be enforced in all situations, leaving some new owners unable to access homes they have purchased.
Alberta hit by double whammy
Alberta markets could be facing the strongest head winds.
On top of the pandemic, the province has been slammed by additional layoffs caused by dramatically lower oil prices.
Calgary real estate agent Alicia Ryan says there are always some people in circumstances that force them to buy or sell, but others should consider waiting.
"Not everybody needs to sell right now, and if you don't need to sell, we're telling our clients hold off until things settle down a bit."
RBC's Hogue says Calgary is in a tough spot. "We believe property values are at risk of a more sizable decline.
The bright spot in all of this appears to be a long way off, with Hogue predicting an eventual rebound that will come in "stages," fuelled by low interest rates and pent-up demand from buyers currently on the sidelines.
"The timing and speed of the recovery is uncertain at this point."
In the meantime, agents are still showing properties, but any potential buyers who want to look will likely have to sign a waiver acknowledging they may be exposing themselves to COVID-19 and accept risks that include illness and death.