Promise in Areas of Europe, US Gives Canadian Housing Market Hope
RE/MAX Canada releases insights in key global markets amidst the COVID-19 crisis
Canadian Real Estate Market Sentiment
- 56 per cent of Canadians who are planning to engage in the real estate market say they expect to do so within less than a year
- Almost half (44 per cent) of Canadians believe that the real estate market will bounce back to the strength it was before COVID-19 by 2021
- 29 per cent of Canadians believe that before the end of 2020, the Canadian housing market will return to its pre-pandemic strength
Toronto, ON and Kelowna, BC, June 16, 2020 – Nothing is symmetrical about the effect of COVID-19 on the housing market. In the same manner that Canada learned containment lessons from other countries where the virus hit earlier, we can also look to these economies to assess the potential rebound in our own economy and the Canadian housing market.
Looking at European markets that are similar to Canada in economic strength and regulatory frameworks, such as parts of Scandinavia, optimism in the Canadian housing market seems well placed. The same can be said in the U.S., where despite a national decline in sales of 20 per cent, consumer fears are beginning to subside as restrictions start to ease and activity picks up, particularly in secondary and tertiary markets.
According to a Leger survey conducted on behalf of RE/MAX Canada, 56 per cent of Canadians who are planning to engage in the real estate market expect to do so in less than a year, showing an eagerness to get back to buying and selling.
“The market has definitely seen a steep decline in the volume of transactions in the last few months, but in much of Canada, transactions have been happening and prices in particular have been resilient. Now that economies are beginning to re-open across the country and in light of some of the recent activity we’ve seen in various cities across Canada, as well as in certain European and U.S. markets, we anticipate that demand could begin to improve much faster than we initially anticipated at the beginning of COVID-19,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada. “Regions such as Toronto, Ottawa and Vancouver are excellent examples, and are already experiencing an uptick in activity and the number of multiple-offer scenarios, pointing to a post-lockdown housing market outlook that is not nearly as dire as some suggested.”
As restrictions begin to ease in Europe and the U.S., outcomes are dependent upon locality and the economic conditions of a state, country, and city prior to the crisis.
Europe’s Housing Market
Europe Real Estate Market Sentiment
As lockdown restrictions begin to ease in Austria, RE/MAX brokers and agents in the region have noted that recent demand has been higher than before COVID-19 took hold, even in comparison to the same period in 2019, as indicated through an increase in website traffic (up 70 per cent in May 2020 compared to May 2019) and requests from end consumers (up 63 per cent in May 2020, compared to May 2019). RE/MAX Europe attributes this to accumulated demand that fell dormant during quarantine, but has since returned in a manner greater than has been experienced in other countries.
In Norway, which is comparable to North America in terms of real estate technology and transparency, insights from RE/MAX Europe coupled with local real estate board data indicate the market experienced its lowest level of transactions during the week of March 16, when sales declined 36 per cent year-over-year. By May 2020, sales were trending upward again, reaching levels just 7.5 per cent below May 2019 activity. Norway experienced an initial 10-per-cent drop in listings, which trended upward to 50 per cent during the lockdown. However, by May 2020, listings returned to the market and were 18 per cent below May 2019 levels. RE/MAX Europe believes that Norway is showing signs of stability as restrictions continue to ease and consumer confidence returns. It is estimated the market could bounce back to sustainable levels by the end of 2020.
In Italy and Spain, which were among the hardest-hit regions in Europe, real estate markets are just now beginning to reopen. Current levels of uncertainty combined with the quickly-changing environment diminishes the reliability of any forecasting in the short term.
The actual impact of COVID-19 on the housing market across all of Europe differs from country to country. Markets heavily dependent on industries hit especially hard by the pandemic, such as tourism, may experience a slower housing market recovery, according to RE/MAX Europe.
“It’s still too early to tell when the housing market across Europe will recover to pre-COVID-19 levels, particularly given the asymmetry of countries and cities concerning their economies, regulatory processes, and pandemic containment efforts,” says Kurt Lukas, Executive Vice President, RE/MAX Europe. “What we do know is that COVID-19 has shifted the practice and focus of our industry as a whole, whether that’s through the increased use of technology such as virtual tours, e-signatures, or video conferencing by consumers and real estate agents a potential shift in buyer trends, such as different types of properties; or economic resilience. While there are still many unknowns in the short-term, I’m confident that real estate will continue to be a good long-term investment, as it historically has been. There’s no question of this.”
VIDEO: Hear what RE/MAX executives in Canada, the U.S. and Europe have to say about their respective real estate markets in 2020.
United States’ Housing Market
US Real Estate Market Sentiment
- In-person showings and foot traffic to offices in many US cities has returned to levels seen in January 2020.
- RE/MAX brokers and agents across the country report that multiple-offer scenarios are on the rise.
- Increasing activity in secondary and tertiary markets.
Leading indicators in the U.S. housing market, such as showing activity from ShowingTime data, point to an optimistic rebound as regions gradually open parts of the economy.
It’s important to note that housing is unlikely to fall victim to the current economic interruption in the same manner as it was impacted during the 2008/2009 recession. Current lending practices are more stringent, and on average, Americans have more home equity now than they did in 2008. This is a key indicator that the country could rebound more quickly, which is already being witnessed in secondary and tertiary markets.
Country-wide, in-person showings and foot traffic to offices in many cities has now returned to levels seen in January, despite a market slowdown in March and April. A good example of this is Connecticut, where according to local office data, transactions in April were similar to levels experienced earlier in the year and in 2019.
In New York, which has had some of the highest case numbers of COVID-19 in the U.S., resulting in strict stay-at-home orders, hope is on the horizon. As the financial epicentre of the country, RE/MAX is seeing signs that the typical buyer demographics in the region may soon shift from professionals and young families who work in the city, to investors and foreign buyers in search of promising investment opportunities. This is expected to help the housing market bounce back.
RE/MAX also notes that this potential shift in buyer type may help to jumpstart activity in suburban regions such as Connecticut, which has become a focus for downtown New Yorkers who are now seeking access to more green space, home office space, and more square footage that is not available to them in the city.
“The housing market in the U.S. is very local. While nationally, there has been a pause on real estate sales activity due to COVID-19, there are multiple states and cities that are thriving as the summer approaches, with RE/MAX brokers and agents across the country reporting that multiple offers are on the rise,” says Fiona Petrie, Executive Vice President and Managing Director, U.S. Operations at RE/MAX INTEGRA. “We feel confident in the resilience of the U.S. market as a whole, and as economies begin to open across the country, our clients are expressing increased optimism as well.”
Canadian Housing Market
RE/MAX of Ontario-Atlantic Canada and RE/MAX Western Canada estimate that the Canadian housing market is likely to gradually begin its return to sustainable, healthy levels toward the end of 2020. As cities slowly begin the reopening process in the coming weeks, there is likely to be a transition from the uncertainty around the home-buying journey that was seen early on in the COVID-19 pandemic, to an increased comfort level among consumers and real estate agents when it comes to adopting new buying and selling processes.
Canadian economies have been hit hard by this pandemic, and the resulting job losses and cloud of uncertainty have left people questioning the future value of their real estate investments. However, many RE/MAX brokers across Canada have reported seeing relative price stability in April and May. According to data from the Canadian Real Estate Association (CREA), April 2020 experienced a 56.8-per-cent decline in sales compared to March 2020. This drop was proportional to the decline in new listings hitting the market, which were down 55.7 per cent month-over-month in April. But as restrictions ease, market activity is already on the upswing. CREA’s May 2020 data reveals national home sales were up 56.9 per cent from April, and the number of newly listed properties was up 69 per cent month-over-month.
Furthermore, the pre-existing pent-up demand for homes in hot markets such as Vancouver, Toronto and Ottawa may help mitigate the decline in buyers who are suffering pandemic-related job losses. Exceptionally low inventory in much of Canada may also contribute to upward price pressure as restrictions ease and demand increases further.
In line with economists’ predictions, such as CIBC Economics, RE/MAX Canada estimates relative price stability by the end of 2020, with a possible price correction in the single digits. The exceptions include regions such as Alberta and Newfoundland, which are still struggling to rebound from a host of shocks, the dive in resource revenues, and the potential for a second wave of COVID-19.
Canadians are equally optimistic, with almost half (44 per cent) believing that the real estate market will bounce back to the strength it was before COVID-19 by 2021.
“The Canadian housing market was strong before COVID-19 hit, and despite the tragic impacts of the pandemic, we are optimistic that housing market could be restored much sooner than initially expected,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “As we saw in our 2020 Liveability Report, Canadian communities are resilient and people love their neighbourhoods, showing a collective commitment to bounce back.”
Global shift to the practice of real estate
The pandemic has pushed the global industry to embrace a variety of technology tools that were previously available but not always adopted to facilitate a transaction. Now, professionals are integrating 3D home tours and virtual open houses into their listing and selling practices. Given that almost half of Canadians (46 per cent) say that in a post-COVID-19 landscape, they’d prefer to work with real estate agents who use technology and virtual services in order to adhere to social distancing guidelines, agents will need to adapt in order to secure and build their businesses.
This sentiment is shared across both the U.S. and Europe, which have witnessed a shift in consumer wants toward a more digitalized home buying and selling experience, such as e-signatures, virtual meetings, and digital paperwork. It is important to note that in some instances, buyers are still requesting in-person home tours before completing a transaction.
Across the U.S., Canada, and Europe, one common trend is forecasted post-COVID-19: technology tools are no longer options, they are a necessity to successfully facilitate transactions.
“A clear takeaway from all this is the importance of skilled, experienced real estate agents,” says Nick Bailey, Chief Customer Officer, RE/MAX, LLC. “Buyers and sellers can’t depend on part-time agents to assist them in a process that’s even more complicated than normal. Especially now, they need a full-time professional who understands the new environment and has the resources to keep them safe while guiding them to a successful closing.”
Additional results from the Leger survey
- 60 per cent of Canadians prefer to use a professional, licensed local real estate agent because they are credible and more trustworthy than do-it-yourself listing services
- 22 per cent of Canadians are likely to buy or sell real estate if the majority of the transaction is done virtually
*An online survey of 1,571 Canadians was completed between May 1 – May 3, 2020, using Leger’s online panel. Leger’s online panel has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.5 per cent, 19 times out of 20.