The coronavirus outbreak has affected everyday life with the media playing a large role in instilling panic through sensationalized headlines. The general public’s fear of the unknown coupled with misinformation has already led to a shortage in personal supplies such as hand sanitizer, face masks, and toilet paper. Thus, it is logical to assume that the real estate market, too, is being impacted. The question is: how?
Short-Term Impact on the Economy
The coronavirus has impacted the economy in various ways, including:
- Decreased tourism
- Suppressed commodity prices
- Disrupted supply chains
- Deteriorating sales and business
Impact on the Real Estate Market
In short, it is a buyer’s market out there. The coronavirus presents the optimal opportunity for buyers to purchase property, especially given the recent decrease in the central bank’s benchmark interest rate by 50 basis points to 1.25 percent. This action was taken in order to stabilize the housing market by combating the deterioration in consumer confidence. Following suit, Canada’s Big Five banks cut their lending rates by the same margin.
In the long-term, it is reasonable to assume that the real estate market will see an increase when the coronavirus situation normalizes. This will be the result of an increase in demand, foreign capital, and immigration. In turn, those who purchase during the coronavirus outbreak are likely to experience increased property values in the future.
However, it is important to note that there is still much uncertainty regarding the coronavirus and the duration of threat. These factors will continue to affect the markets to various degrees. For example, information gathered from Toronto in 2003 where the SARS epidemic hit most heavily, the housing market was not adversely affected.
Additionally, new condos and luxury developments will most likely see a drop in their sales. A significant amount of their buyers are foreign nationals. With a growing amount of quarantines and decreasing tourism, this segment of the real estate market will be negatively impacted in the short-term.