Why Canadians should think long term in real estate – especially now
Unprecedented doesn’t even begin to describe it. A few weeks ago, we awaited an exceptionally active spring real estate market in the GTA, buoyed by the recent easing of mortgage regulations and interest rates.
Now, however, instead of seeing a spike in buying activity, we’re hunkering down, battening down the hatches and riding out the COVID-19 crisis, all in an attempt to flatten the curve.
Historic, surreal and unbelievable might be more suitable adjectives to describe these times.
And under such circumstances, with normal life routine displaced by the daunting and unknown, people naturally tend to worry.
In real estate, if location, location, location is the No. 1 rule of thumb, thinking long term is right there along with it, as 1A.
We’ve been through similar challenging times: The 1989 recession, Y2K, 9/11, the Great Recession of 2008-09 and SARS. Now we face COVID-19.
At times of economic uncertainty and extreme stress in the marketplace, people always revert to their number one emotional and financial investment – their home. People trust real estate. Buying that first condo, a new home for their growing family, downsizing once the kids move out or renovating the place you already love.
And, so it will be again.
But don’t take our word for it. Consider, for example this report from the Real Estate Investment Network (REIN), a national group of investors which bases everything it does on independent research.
According to the REIN Special Report: The Coronavirus’ Impact on Canadian Real Estate, Canadian real estate will see an immediate cool-down – but a long-term lift. We may see a temporary decrease in GDP growth, but key drivers of real estate such as population growth and increased foreign capital, demand and property values will eventually rise.
“It’s still premature to predict how the coronavirus outbreak will be resolved, but data suggests that panic will only worsen the country’s economic situation,” says Jennifer Hunt, REIN’s vice-president of research. “There is reason to be alert, but there’s absolutely no reason to further raise alarm and cause more public fear. In fact, as a Canadian real estate investor, this may represent a buying opportunity for investors, with a likely future positive lift in rental and housing markets.”
Open for business
It might be a stretch to say it’s “business as usual,” but life does have to go on, as soon and as safely as possible. New home builders and developers are open for business, are accepting presentation centre visits to by appointment only, and as much as possible are moving communications to digital.
Meanwhile, the Bank of Canada recently lowered its influential overnight rate target twice in less than two weeks – from 1.75 to 1.25 per cent on March 4, then again to 0.75 per cent on March 16. Canada’s Big Five banks are following suit by lowering mortgage rates, and they, too, are increasingly going digital to facilitate business.
All of this means the opportunities to buy are still there (though with a modified process), with less short-term competition and a more buyer-friendly mortgage and borrowing landscape.
Indeed, as challenging as these times may be, it’s even more important to focus on the long term. And on that front, new-home ownership in the GTA is still a solid investment.