COVID-19 has impacted nearly everything in the world as we know it, from sports to business, and real estate in Canada is not left out.
Prices of homes could drop, but the demand for homes, especially in the urban areas, could drop even more.
All these occurrences are a result of the effects COVID-19 is having on the global economy, as these issues are not exactly peculiar to any country. These impacts have no time frame to them, so they could theoretically last for a long time!
In Canada, the real estate scene is undergoing a lot of changes, many of it unforeseen up till the time of the pandemic. For example, up till the time of the pandemic, Canada was welcoming over 300,000 immigrants into the country. Out of these, most immigrants moved to places like Toronto and Vancouver. These immigrants were a key source of real estate demand for these cities.
But then COVID-19 happened, and lockdowns were announced around the world. Because of this, there was a drastic drop in the number of immigrants in Canada.
This is just one problem facing the real estate industry in Canada. Other issues will be discussed further;
1) Rising unemployment
2) Suburbs and small cities rise in popularity
3) General uncertainty
At 13%, the unemployment rate in Canada is at its highest since 1982. This figure can be adjusted to a whopping 17.8% if you adjust for general unemployment, regardless of whether it's COVID-19 enforced or not.
These staggering figures mean that a higher number of people are losing/have lost their sources of income, and that is bound to have a ripple effect on the real estate market. While many of these people are getting government assistance such as CERB, the government’s support can’t run forever. Many people may use their RRSP for basic needs and consequently they can’t use the homebuyer’s plan for a down payment.
Another potentially permanent alteration in the operation of the Canadian real estate market is the fact that more and more people are working from home, and as a result, there are fewer and fewer demands for apartments and condos in the city centers.
This, in conjunction with the fact that many people are staying away from the major cities for fear of contacting the COVID-19 virus, means a rise in demand for rural or even cottage counties’ real estate.
For most people who want to purchase real estate in this period, houses in small cities and rural areas appeal more than before. This is because of the shift in the work culture from the physical meeting place, the office, to working from home.
Markets, no matter how sophisticated they are, are a product of the perceptions and assumptions of people. The general feeling about the future now is still quite uncertain, and as long as it remains so, there will most likely be a lower amount of transactions with regards to real estate in Canada.
The global economy now is generally undergoing a downward shift, as the COVID-19 pandemic has caused prices of a lot of commodities that determine the health of the global economy fall. An example of this is the price of oil.
As long as people are still skeptical about the health of the economy, there will not be a lot of activity in the real estate industry.
The main issues that are affecting the Canadian real estate market are mostly a reduction in immigrants and increasing unemployment.
These two issues are the bedrock for the current malaise of the real estate market in Canada, but this effect can’t be seen clearly now because of the current government programs but things can change when the government’s programs stop.
Luke Fitzpatrick has been published in Forbes, Yahoo! News and Influencive. He is also a guest lecturer at the University of Sydney, lecturing in Cross-Cultural Management and the Pre-MBA Program. You can connect with him on LinkedIn.