Canadian, GTA markets to show resilience through COVID-19: Royal LePage
Average Canadian – and GTA – home prices are expected to remain stable this year, despite the challenges brought on by the COVID-19 pandemic, according to the latest Royal LePage House Price Survey and Market Survey Forecast.
If the strict, stay-at-home restrictions characterizing the fight against COVID-19 are eased during the second quarter, prices are expected to end 2020 relatively flat, with the aggregate value of a Canadian home up a modest one per cent year-over-year, to $653,800. If restrictions are sustained through the summer, the negative economic impact is expected to drive home prices down by three per cent to $627,900 year-over-year, the realty firm says.
In December 2019, Royal LePage forecast the national aggregate price to increase 3.2 per cent by the end of 2020.
“The impact of COVID-19 on the Canadian economy has been swift and violent, with layoffs driving high levels of unemployment across the country,” says Phil Soper, president and CEO, Royal LePage. “While it is sad that these people skewed strongly to young and to part-time workers, for the housing industry, the impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate.
“From our experience, with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020,” Soper adds. “Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.”
Broad-based measurements of industry activity point to a sharp decline since the provinces declared states of emergency. Home showings are down by more than two-thirds, based on Royal LePage sampling, while open house gatherings at properties for sale have been reduced to almost zero nationwide. ”
As we ease out of strict stay-at-home regimens, sales volumes will return; traditional home sales practices will not,” says Soper. “The popular ‘open house’ gathering of buyers on a spring afternoon is gone, and it won’t be coming back any time soon. The industry is leveraging technologies that allow a home to be shown remotely and social distancing protocols, where we restrict client interaction with our realtors to limited one-on-one or two meetings, will continue for months and months. This process is inherently safer than a trip to the grocery store.”
The aggregate price of a home in Canada increased 4.4 per cent to $655,276 in the first quarter. When broken out by housing type, the median price of a two-storey home rose 5.1 per cent year-over-year to $770,005, while bungalows and condominiums rose 2.1 per cent and 4.4 per cent to $541,040 and $493,917, respectively. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions.
“If the fight against the coronavirus requires today’s tight stay-at-home mandates to remain in place for several more months, with no semblance of normal business activity allowed, temporary job losses will become permanent and consumer confidence will be harder to repair,” says Soper. “This would place downward pressure on both home sales volumes and prices.
“Equally, if the collective efforts of Canadians slow the spread of the disease to manageable levels, and if promising science and therapeutic drugs are announced, people will return to their jobs, market confidence will bounce back quickly, and we could see Canada’s real estate markets roar back to life, with 2020 transactions delayed but not eliminated.”
In the GTA, housing demand outstripped supply, putting significant upward pressure on home prices. During the first quarter of 2020, the aggregate home price rose 7.5 per cent year-over-year to $866,211.
When broken out by property type, the median price of a condominium saw the highest appreciation, rising 8.8 per cent year-over-year to $580,508, while two-storey homes and bungalows rose 7.7 per cent and 3.7 per cent to $1.01 million and $826,186, respectively.
If business activity resumes by the end of the second quarter, the GTA may see a year-over-year increase of 1.5 per cent to its aggregate home price by the end of 2020, to $861,100. If business activity resumes in late summer 2020, the region could see a decrease of 0.5 per cent year-over-year in aggregate home price to $844,200.