The impact of COVID-19 on Victoria’s economy is undeniable, with many businesses forced to close and infrastructure operations pushing forward with strained capacity as government agencies encourage social distancing to limit the spread of a novel coronavirus.
But what does this mean for Victoria’s real-estate market, and what should you do if you’re in the process of buying or selling a home on southern Vancouver Island? We’ve reached out to several local real-estate professionals to get their take on the situation, and how they see the market playing out into mid-2020.
What’s happening today
Home re-sale listings are the dominant driver of Victoria’s real-estate market and generate some 75% of annual sales, while pre-sale (or new construction) offerings pick up the remainder.
When the market is operating under normal conditions, such as it was at the beginning of 2020, the supply of homes will dictate a pricing plateau as homebuyers compete for a limited supply of inventory. An over-supply means buyers can be picky, typically driving down the price, and a low or “just right” supply puts varying degrees of upwards pressure on prices and the seller’s ask is often met with a reasonable bid.
Victoria REALTOR Marko Juras says the market is currently exhibiting a stalemate scenario where sellers are pulling listings as buyers (literally) stay home.
“We’re entering a phase where people are heeding the advice from all levels of government and implementing social distancing into their lives, which means things like home walk-throughs, home inspections and open houses are widely seen as activities to avoid, and without them the cogs of the system come to a grinding halt,” Juras says.
Sellers, Juras says, are being encouraged by agents to assess their need to sell and their individual situations prior to making a decision to initiate, pause or pull a listing.
“Every seller’s situation will be different. You have individuals looking to move to another home, others are downsizing, others still are moving, and a small percentage are being forced to put their property on the market due to financial or personal reasons. Where you fall into that spectrum dictates how you’ll respond to this market.”
Buyers have more leeway, but the option is not always there to walk away from a deal or postpone a purchase.
“For example, you have individuals that have planned re-location moves for months in advance and need to follow through despite the crisis. Renting may be an option for some, but it's not an ideal one for many and that is just one of the scenarios out there. Individuals in such situations may look at vacant completed product that can accommodate a quick completion period.”
For now, Juras says, sellers that can withhold a sale may want to consider doing so. Those who are pressured to sell for financial reasons are encouraged to speak with their lender about COVID-19 mortgage deferral programs.
Despite the drop in sales, some 1,500 listings remain in effect across the south Island and deals are being written on a daily basis.
“In times like these there can be opportunities,” Juras said. “As long as buyers and sellers take the necessary precautions, there is no reason to walk away from a purchase that makes sense for both parties. And given today’s circumstances, vacant properties are a prime example of a market segment that is very appealing.”
Homeowners with CMHC-insured mortgages, which typically apply to home purchases with down payments below 20% or for self-employed individuals, can begin discussions with their lender regarding a COVID-19 mortgage deferral program launched by the federal government in addition to existing CMHC mortgage repayment tools available to homeowners.
More information on this measure can be accessed here
Chartered banks, credit unions and private lenders are launching measures to assist mortgage holders with payment deferral programs. There is no single set of guidelines currently overseeing lending institutions and how they approach deferrals. Clients are asked to speak with their mortgage advisor or broker to learn about the options available.
The outlook through mid-2020
With the present-day market faced with a new backdrop, the variables facing the industry are many.
David Langlois, a REALTOR with Macdonald Realty, says the beginnings of British Columbia’s containment measures are having a profound impact on consumer activities, but unlike scenarios that have previously impacted the local real-estate market, the present-day situation is entirely unique.
“It’s unprecedented,” Langlois said. “We really don’t have any idea if this is a one month thing, a six month thing or an 18 month thing, and looking to mid-2020 it’s hard, at this point in time, to assume anything with any level of certainty until we know more about the government’s next steps.”
With that in mind, the primary differentiator between prior market shake-ups and spring 2020 leads Langlois to believe COVID-19’s footprint could ultimately materialize as a hiatus for what was a healthy and thriving market until social distancing changed the landscape.
“Fundamentally there is no internal structural problem with Victoria’s real-estate market. The situation is an entirely external event that is preventing many buyers and sellers from making deals. You’ve got interest rates falling, and you’ve got to consider that the people who were going to buy a home a week ago now want to buy it even more. And that demand is met with sellers asking ‘do I want people showing up and walking through my house?’ It’s a stalemate.”
If society re-enters its normal rhythm by May, Langlois sees the outcome as one where the market will pick up largely where it left off. And given such a pause, the pent-up demand could yield a surge of activity.
“I see a case where we get through this in a month or six weeks and pent-up demand will make the market surge fuelled by low mortgage rates, and sellers are likely to respond with a rush of listings.”
For the time being, Langlois is working with his clients to wind down their listings and preparing for a short-term slowdown. His advice to individuals concerned about the next two months and summer of 2020 is to stay focused on long-term goals, and to not lose sight of real-estate’s role as a historically safe investment.
The outlook through late-2020
Gazing further into the year, Victoria REALTOR John Papaloukas of Sutton Realty believes 2020’s busiest real-estate season could occur after the summer heat winds down and ahead of the winter holidays.
“Provided governments ease up today’s social distancing requirements by late spring or early summer, I can see this year’s fall market shaping up as the spring market,” Papaloukas says. “At the end of the day people need to buy and sell homes, and if we’re kept from carrying on business as usual through mid-2020 I foresee an all-out rush by buyers and sellers come September.”
However, Papaloukas notes that it’s not only social distancing that is driving the market slowdown. The lending industry has also adopted new policies that are forcing some buyers to put aside their plans.
“Lending institutions both locally and nationally have been inundated with calls to service the needs of their existing clients who may be pursuing re-financing options, deferral programs or assistance measures given the volume of temporary lay-offs we’ve seen and how that has curtailed the cash flow of many Canadians. The short end of this is lenders are having a difficult time handling new mortgage applications with some temporarily postponing pre-qualifications or outright refusing to take on new customers.”
Papaloukas believes everything will come down to the timelines involved, with impacts on the broader market and lending industries based entirely on the length of time governments require communities to maintain self-isolation and social distance protocols. But that’s not to say the industry cannot readily adapt to leverage everyone’s best interests to ensure that those who need to buy or sell can do so safely.
“Despite the factors driving our spending and social activity choices today, we’ll eventually enter a period of a temporary new normal where buyers and sellers understand the underlying need for social distancing and proactive maintenance, and they’ll incorporate them into their strategies and guide their clients accordingly. It’s our role, as agents, to help facilitate the buying and selling process regardless of the macro and micro impacts on the markets, the economy and society, and we’re committed to doing so. At times of uncertainty, our homes become our havens, and as a REALTOR you are now even more deeply driven to help people get into homes where they feel safe and secure.”
Ultimately, we will get through this. As Papaloukas says, “we are truly in this together, and the only way out is through.” C
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