Without the tiniest shred of a doubt, 2020 is one of the worst years that some of us have experienced. Of course, other issues caused Canadians across the country to go through certain challenges. But, above many of these hurdles, for the entire world, is the coronavirus pandemic.
This disease and its spread singlehandedly affected several industries in the world. So much that work was grounded to a halt for many people either through retrenchment or temporary pausal of duties. One such industry affected by the coronavirus pandemic is the real estate industry. To make matters worse, the world has had to start gearing up for a second wave of the pandemic. This, in itself, threatens to affect such industries as real estate further.
As such, in this article, we’ll be exploring what effects the pandemic has had on real estate investment in the country.
What effects have the coronavirus pandemic had on real estate investment in Canada?
In this year, we’ve had to adjust to many realities. One of them is wearing a mask. Another is staying more than 6ft away from people who don’t particularly need our attention. However, these aren’t the only things COVID-19 did or affected. In the sector of real estate investment, the pandemic has the following effects:
1. An increased need for alternatives to face to face business for real estate agents
One of the things that the world had to deal with during the coronavirus pandemic is working from home. For some sectors, this wasn’t quite possible. After all, there are only so many medical services you can render through your video conference application. In other sectors like real estate, it became imperative. This was because of the need to practice social distancing.
So, even though some part of real estate was considered an essential service by the Canadian government as of March 2020, people still had their fears moving about. Now, real estate agents have to find new ways to help clients see the houses and properties available for sale across the country.
To adapt to this, many realtors decided to go online and innovate, with some using 3D renditions of apartments. Others who were not able to do so saw an all too obvious downturn in sales.
2. A significantly reduced number of spring sales
On the 11th of March, 2020, the coronavirus was officially declared a pandemic by the World Health Organization. At that point, you could say that the panic switch was flipped to “on.” But, before that, real estate was doing quite well in Canada.
To put things in perspective, the market for spring real estate sales was already getting prepared to break old sales records. This is especially true for some of the largest cities in Canada. For example, Toronto and Vancouver sales transactions year over year rose by up 45.6% and 44.9%, respectively. One particular thing that supported this spike was the lack of new properties being sold. As such, there was a tighter squeeze in buyers for the urban areas.
However, the coronavirus pandemic ultimately cooled down the sales spring to some extent. People had financial issues and worries, having been stuck at home for several weeks and months. This was besides the fact that people were trying to avoid overcrowded areas actively.
So, apart from those who had urgent real estate needs, many others chose instead to simply hold off on purchase for a while. This much was obvious in the 69% reduction in sales in the first seventeen days of April 2020 compared to 2019, according to the Toronto Regional Real Estate Board. Ultimately, spring sales were much cooler than expected.
3. Strained rent collection for landlords and real estate management organizations
Alongside the numerous health and safety concerns, the coronavirus pandemic brought several economic concerns as well. Essentially, people had significant issues with the payment and renewal of rent. The situation was such that landlords and property management companies were at a stalemate.
If they insisted on immediate payment from people who couldn’t meet up with the demand, they would lose customers. Coupled with the reduced number of sales, these landlords would’ve had to deal with vacant property spaces for extended periods. However, if they decided to defer rent, it would’ve kept their houses filled, but their wallets slightly more deserted than usual.
As such, many real estate companies had to get into specific conversations with their existing customers. Some of the larger companies announced temporary deferrals for their clients who couldn’t immediately meet up with the cost. Generally, landlords and tenants had to find a new way to meet in the middle regarding rent.
What are the potential long-term effects of the COVID-19 pandemic on real estate investment in Canada?
You see, the coronavirus pandemic is one of the most challenging global problems of our time. However, like every other pandemic we’ve experienced, it either leaves or we’ll find a way to deal with it.
Now, there isn’t exactly a way we can predict the end of the coronavirus pandemic. This is especially so considering that we are now in the process of a global second wave. However, the pandemic will end, and humanity will move on. Like it always has, in the long term, the real estate market will bounce back.
The need for real estate is directly proportional to the growth of the human population. Considering the projections of increase over the next few years, it’s safe to say that the world will always need real estate. At least, until humanity finds a way to colonize Mars. Even then, we might still need to follow the earth’s economic rules and standards to maintain order and sanity.
So, while there’s a strain on the real estate market now, there isn’t much of a need to worry. Things will eventually go back to normal.
In Conclusion, The coronavirus pandemic started small but outdid itself in more ways than one. Particularly in the Canadian real estate market, adjustments had to be made and shifts here and there. However, these things are largely temporary. The virus will not last forever, and eventually, things will be better.