By: Nicole Sullivan
Despite sudden drops in housing market sales activity in the last two months, almost two-thirds (60 per cent) of buyers still consider 2020 a good year to purchase a home.
A recent survey by Zolo shows that even with higher unemployment and uncertain business conditions, buyers still intend to buy a residential property either this year or over the next five years.
The survey, which polled more than 2,100 North American households between April 15 to 17, 2020, shows that despite an economic slowdown due to the COVID-19 outbreak, the demand for residential real estate is still quite high — with 16 per cent of buyers planning to buy this year and another 47 per cent planning to buy within two to five years.
“This year buyers see an opportunity to get into the market at a discounted price,” explains Romana King, director of content for Zolo, the largest independent real estate brokerage and one of the most popular online property marketplaces in Canada. “Current buyers expect a 5 to 10 per cent drop in purchase price due to the impact of COVID-19.” That’s a savings of almost $87,000 based on CREA’s Greater Toronto benchmark price (the latest data ending March 2020).
“Prices may dip, but expectations of big price cuts may be unrealistic,” cautions King. Even though sales activity in Toronto is down by more than 67 per cent since the start of the coronavirus outbreak, King is confident sales activity will return to pre-COVID-19 levels.
“Any time there is market uncertainty, the market responds with a momentary pause until buyers and sellers can absorb the change and return to transactions.” King points out that this is what happened after the introduction of the Fair Housing Plan in the spring of 2017. “A few months after the regulatory changes, market activity rebounded, and prices began to increase, once again.” The same scenario would play out again after the introduction of the federal government mortgage stress test in January 2018.
Prior to the pandemic, Toronto was on track for a hot spring selling season with a 46-per-cent year-over-year increase in sales activity for the month of February, according to data from Zolo and the Canadian Real Estate Association (CREA). “Even before the outbreak, inventory was limited. Since the outbreak, there is significantly less inventory which means buyers have fewer options. Sustained demand with reduced inventory should keep prices stagnant in 2020.”
Given the requirements for social distancing and self-isolation, much of the stalled activity is due to inaccessibility of properties. One result is that property sits on the market longer. As of April 2020, the average number of days a listing was in the market was up 35 per cent, year-over-year, to 25.4 days.
To keep the market going, many realtors and tech-savvy brokerages, like Zolo, offered online and virtual tools as well as mobile-ready access. It turns out, buyers were waiting for this nudge into the virtual world with 52 per cent of the respondents reporting that they would “prefer to complete the entire home buying process using only online tools.”
That doesn’t mean buyers want to replace their realtor with a computer. Almost half (48 per cent) of home buyers still prefer to work with a realtor, and more than a third (35 per cent) still want to attend open houses. However, 38 per cent would like to use a mobile app, 34 per cent want to use virtual tours or pre-scheduled video walk-throughs, and another 10 per cent want access to professional square-footage floor plans. (Multiple responses were allowed for this survey question.)
Buyers and sellers can expect lower-than-average sales activity probably for the remainder of the year, says King. However, she doesn’t anticipate significant price reductions, particularly in the most sought-after neighbourhoods and price bands. “Buyers and sellers will continue to adopt online and virtual tools, which will help increase sales activity, despite continuing restrictions due to the pandemic,” she says.
“While, there’s no doubt the housing market came to a temporary standstill due to COVID-19, buyers still want to get a piece of this city’s robust property market. For many, homeownership is still the cornerstone of financial stability,” says King.
The findings of the Zolo Homebuyers Intentions Survey are based on an online survey conducted by Zolo.ca between April 15-17, 2020, of 2,128 respondents who live in North America. The estimated margin of error is +/- 2.12 percentage points, 19 times out of 20.