A stillness has descended on the real estate market of Toronto and surrounding areas as citizens confront the COVID-19 pandemic.
The Ontario Real Estate Association, the Toronto Real Estate Board and the Real Estate Council of Ontario have all sent missives to agents with recommendations on how to navigate the health crisis.
The message from the overseers is blunt: Ontario remains under a state of emergency, and while the provincial government deemed most of the real estate industry “essential,” it did so in order to permit transactions to close – not to allow the industry to carry on with business as usual.
Agents are allowed to take on new listings in the event an owner has a need to sell. But digital technology is largely replacing in-person meetings and showings. Preparing properties for sale and the limited number of showings follow strict safely protocols.
Andre Kutyan, a real estate agent with Harvey Kalles Real Estate Ltd., says sales volumes have been on a steady slide.
He analyzed transactions in a swath of central Toronto and found that there have been 29 firm deals in the past seven days. In the preceding seven days there were 60 transactions and in the week before that, 120.
Looking back several weeks reveals the same trend, says Mr. Kutyan, who has suspended some listings and postponed others.
But he has listed three properties in the past week because the owners, for various reasons, need to sell.
“The reality is that people are not listing unless they have to,” he says.
He has received a few angry texts and calls from agents who argue that all business should be suspended, Mr. Kutyan acknowledges, but his position is that he has a duty to clients who can’t hold off.
A detached house in the Allenby area, a semi-detached house in Bedford Park and a one-bedroom condo unit in Bloor-Yorkville have all attracted potential buyers, Mr. Kutyan says.
Mr. Kutyan, who favours the strategy of setting an asking price below market value and holding off offers to a set date and time, says some potential buyers have tried to jump the line with a bully offer.
“I’ve had pre-emptive offers on every single one,” he says.
Some house hunters need to buy because they’ve sold another property or given notice that they’re ending a lease, he says. Others are opportunistic.
“I think there are guys out there who want to snag a deal.”
Mr. Kutyan prequalifies potential buyers and has frank discussions with them about a realistic selling price.
He provides previews of the property via technology and follows all of the protocols for physical distancing and other safety precautions at the rare showings he does in person.
Harvey Kalles Real Estate is one of the brokerages participating in the growing practice of requiring buyers, sellers and service providers to acknowledge the risks to personal health that arise from showing and visiting the property during the pandemic.
The electronic forms contain an indemnity agreement that seeks to shield the brokerage and its employees from claims arising from a visit to the premises.
Mr. Kutyan says such waivers are becoming more common.
John Lusink, president of Right at Home Realty Inc., says his firm has closed all 12 of its branches to face-to-face business.
The firm, which operates in the Greater Toronto Area, Barrie and Ottawa, is completing deals already in the works but is following recommendations to delay new listings if possible.
“If people don’t have to sell, the message is ‘hold off if you can.’”
Mr. Lusink says some clients have already sold their existing house and need to buy another one or vice versa.
Showings have been dropping daily and sales are on a steady downward slope, he says.
Deals have been taking place and some properties with offer dates are still seeing competition. But where there might have been nine or 10 bidders in recent weeks, it’s now more common to see one or two.
But owners who need to sell are still able to strike deals.
“Fortunately there is still so much pent-up demand.”
Mr. Lusink expects the slump in listings and transactions to become more pronounced in April.
He notes, however, that 2019 also had a particularly quiet spring market. In early summer, it began to pick up.
He says that could happen again this year, with an upturn in June or July, but only if the fears surrounding the coronavirus have passed. Listings were already slim before the crisis and that trend could continue.
But while that’s the optimistic view, Mr. Lusink is not ruling out the risk that the widespread layoffs and job losses in the business community could lead to a downturn in the market.
In the fall of 2008, the global financial crisis prompted buyers to hit the pause button almost overnight. But after a few months, credit flowed again and the real estate market in Canada picked up strongly.
Different forces are at work this time.
So far he hasn’t seen that kind of shift in buyer sentiment, Mr. Lusink says, but he worries about a hit to the country’s economy.
“I think this is different. I think it will be a longer-term recession,” he says. “As people get laid off, that’s a different kind of financial crisis. They won’t qualify for a mortgage.”
Mr. Lusink is also keeping an eye on sales agreements that have been signed in recent weeks but have not yet closed.
He expects banks and other lenders to scrutinize deals carefully. If they become concerned about the security of the buyer’s income, the lender may not be willing to provide a mortgage, he says.
Things also get tricky for highly indebted consumers who have purchased a new home but then run into trouble if they can’t sell their existing one or an agreement falls apart.
“Not many buyers can hold two mortgages or qualify for a bridge loan,” Mr. Lusink says.
Duncan Fremlin, a real estate agent with Re/Max Hallmark Realty Ltd., is informing his clients that a recent snapshot of the market showed listings rising as sales dropped. The number of sales above the asking price also declined during that window.
Mr. Fremlin predicts that trend will continue. Some people wonder if the dynamic makes this a good time to buy, the veteran agent says, but he is urging caution.
It’s too soon to be able to offer a reliable outlook, he says, but he notes that in the recession of 1990, the real estate business ground to a halt.
“For the first time in decades in Toronto, selling a house in a good neighbourhood within a reasonable period of time is not a given. The risk factor is high,” he says.
Mr. Fremlin adds a grim warning: “with so much uncertainty in the world, the bank appraisals may not match what the buyer paid.”
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