There are a lot of risks and opportunities in the Canadian real estate market during COVID-19. A lot of investors are feeling confused about hearing about the destruction of the Canadian economy and the lowest interest rates. However, at the same time, they are hearing about new records for real estate prices in Victoria, Vancouver and in many other cities across Canada.
It’s obvious that something is off with the real estate market. 1+1 no longer equals 2. Realtors need to be prepared for a large dip in the market when it comes.
Real estate sales are always highest between March and August. All the market confusion started back in March when COVID-19 first landed in Canada. People who were thinking of buying or selling property decided to hold off to see what happened.
Most people waited until July or August to start looking for a property. This means that six months of sales happened in two months. This has created a false positive that real estate is hot in B.C., among other places.
There are some dishonest real estate agents that are wanting to promote that the market is doing well. If people believe there are no property buyers right now, they will not list their houses. People should not get market information from real estate agents. And when they do deal with a Realtor, they need to make sure they are reaching out to a reputable professional with a proven track record.
If the sky were falling and zombies were walking around Vancouver, some Realtors would still say it’s a great time to get into the market!
A report from Insights West found that 53 per cent of consumers surveyed don’t see Realtors as being honest. This is why I kick Realtors off our platform all the time if I find they were dishonest or manipulative. According to the study, Realtors are seen as being less honest than journalists! Yikes!
Are real estate prices about to drop?
There are many experts who are saying the opposite of the real estate agents. Evan Siddall, CEO of Canada Mortgage and Housing Corp., who is an expert on Canada’s mortgage health, said not to trust data from Realtors.
In Mr. Siddall’s expert opinion, there will be an average housing price drop of nine to 18 per cent over the next 12 months. He believes that places like Vancouver and Toronto will be hit much harder than other cities in Canada.
This is because of Canada’s high unemployment rate due to COVID-19. If people can’t pay their mortgages, they will default. After six months of default, a judge will likely order the property to be sold to cover the mortgage. When that happens, there will be a flood of new cheap properties on the market. Too much supply and prices drop.
The last large market downturn in Canada happened back in the early 1980s. Real estate prices dropped 25 per cent year over year in Vancouver. This happened when house prices got so “high” that people stopped wanting to purchase real estate.
The interest rates were also sky-high back then. In 1981, the interest rate in Canada was 17.93 per cent. People simply could not afford a mortgage at such a high rate.
It is a similar situation now, not because of high-interest rates, but because of low employment and high real estate prices driven by foreign demand. I hope that some good comes of COVID-19, and real estate prices drop to allow locals to afford real estate.