Is It Different This Time? Recessions and the BC Housing Market

BCREA

Summary Findings:

• The 2020 COVID-19 driven recession will be deep, though the duration may be shorter than past recessions.  
• We expect that home sales will post an initial sharp decline as households and the real estate sector adhere to social distancing.  
• As measures implemented to mitigate the spread of COVID-19 are gradually lifted, we expect that low interest rates and pent-up demand will translate to a significant recovery in home sales and prices.

The Canadian economy has weathered three recessions in the past 40 years, each unique in cause, depth and duration. However, there is considerable similarity in how the BC housing market has both endured and recovered from those recessions.

In this market intelligence, we examine the impact of past recessions on the BC housing market and provide preliminary projections on how COVID-19mayimpact provincial home sales and prices over the next 24 months.

The 2020 Recession –How bad and how long?

The 2020 recession likely began in February, meaning it is still in its very early stages. Since 1980, the average Canadian recession has lasted between 8 and 25 months and is characterized by a contraction of about 4 per cent in real GDP and a jump in the unemployment rate of 4.5 percentage points.

Provincial economic data is only available annually, making it much harder to track the duration of recessions. We know that during the 1981/82 recession, the BC economy contracted by 6.4 per cent, and the unemployment rate jumped nearly 10 points in the worst recession on record for British Columbia. The provincial economy performed much better in the 1990-92 recession, with real GDP eking out meager growth over that period, though the provincial unemployment rate did spike to nearly 11 per cent. During the 2008-09 Financial Crisis and recession, we estimate the BC economy peaked in November of 2008 and contracted 3.7 per cent over the following 12 months while the unemployment rate rose more than 4 points.

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Condos at The Marq offer rare freehold opportunity right next to UBC

Simon Briault
The Province

There are some generally accepted definitions of desirability when it comes to multi-family residential developments — the walkability of the neighbourhood, the accessibility to nature and the quality of the homes themselves are among the most common. The Marq has all of these things in spades. But what really sets this project apart is its rarity.

The Marq is located in the University Endowment Lands (UEL), the physical legacy of the University Endowment Land Act of 1907, which established a lands trust to raise capital for the formation and initial operation of the University of British Columbia (UBC). Most of the homes in the area are 99-year, prepaid leaseholds. But Westland, the developers behind The Marq, are offering freehold homes at this 22-unit development, which will be located right next to UBC.

“These freehold opportunities just don’t come up very often,” said Ashley Willard Bauman, a sales and marketing consultant who is working with Westland on the project. “That ownership element in this location with a product of this standard — it’s really a special and unique offering.”

“I cannot think of another area that has more walkability,” Willard Bauman added. “The number of shops, restaurants and amenities in the neighbourhood is truly remarkable. You are steps to the very best sports and athletic facilities, an aquatic centre, a tennis centre. The cultural and natural amenities are fantastic too — theatres, museums, art galleries, golf courses, botanical gardens, Spanish Banks — it’s all there on your doorstep. There’s even a fully functioning farm at UBC.”

Other attractions of The Marq — apart from being right next door to one of British Columbia’s most prestigious universities, of course – include shopping and dining districts along West 4th and West 10th Avenues, Kerrisdale Village and Oakridge Centre Mall.

Willard Bauman said the condos at The Marq reflect Westland’s experience building high-end single-family homes. The local, family-owned company is just completing its first multi-family project at Dunbar and 16th Avenue called The Grey, which will be move-in ready later this year.

“They recently started to get interested in multi-family homes, acquired some sites and built a team of local experts around them to execute on those projects,” said Willard Bauman. “The Marq is their second multi-family development, but the company has many other sites going through the approval process right now.”

Homes at The Marq have nine-foot ceilings in main living areas, wide-plank engineered oak hardwood floors and illuminated closet organizers. There are two custom colour palettes by BAM Interiors to choose from and the building was designed by Rositch Hemphill Architects.

The kitchens feature Italian-imported cabinets from Inform Projects, integrated pull-out pantry organizers (in some homes), engineered quartz countertops and slab backsplashes, continuous under-cabinet LED linear lighting and Legrand Adorne pop-out outlets. There are stainless-steel Kohler undermount sinks with graduated edges and accessories. The Gaggenau appliance packages include: 36” or 30” integrated fridges; 30” five-burner gas cooktops; 30” wall ovens; 24” built-in microwaves and 24” integrated dishwashers.

Ensuite bathrooms at many of the homes at The Marq feature Kohler Veil elongated toilets with integrated bidets, heated seats, LED night lights and hands-free opening and closing seat covers. There are custom mirrored medicine cabinets with halo-lit mirror doors, and double wall-hung vanities. The showers have Silestone engineered stone with linear drain systems and there are quartz ledges on the free-standing tub and shower walls to create additional storage.

“We sold five of the 22 homes in the first week — all to local buyers — so we’re really pleased with how this development has been resonating,” said Willard Bauma. “Our demographic is typically in the 40 to 60-year-old range and many of them have been looking at UBC for a while but were waiting for a freehold opportunity. The walkability of the neighbourhood makes what’s on offer at The Marq very special.”

Homes at this four-storey, concrete building have either two or three bedrooms. Units range in size from 830 to 1,020 square feet and prices start at $1.3 million. Homes are on sale now.

The Marq

Project location: 2225 Acadia Road, Vancouver

Project size: 22 homes with either two or three bedrooms. Units range in size from 830 to 1,020 square feet and prices start at $1.3 million.

Developer: Westland

Architect: Rositch Hemphill Architects

Interior designer: BAM Interiors

Sales centre: 3695 4th Avenue West

Hours: Due to COVID-19 crisis, we are only available by appointment.

Sales phone: 604.568.8889

Completion date: Fall 2022

Website: https://westlandliving.ca/themarq/

© 2020 Postmedia Network Inc

Home sales across Greater Vancouver were down 34 percent by April

Sean MacKay
Livabl

Home sales across Greater Vancouver were down 34 percent by April’s halfway point, the first full month to be impacted by the COVID-19 pandemic.

There were 564 homes sold in Greater Vancouver as of April 15th, according to data published by Kevin Skipworth, Managing Broker at Dexter Realty. This figure is 34 percent lower than the same period in April 2019 and also down 46 percent from the first half of March 2020.

Skipworth, who regularly distributes mid-month home sales data for the region, noted that new listings in April are also down significantly. As of April 15th, there are 1,105 new homes listed, compared to 2,890 by the same point last year and 2,511 during the same period in March.

Major declines in sales and listings were anticipated by market observers as the effects of the strict social distancing measures and business shutdowns curtailed real estate activity across the country.

In an email sharing the data, Skipworth acknowledged that the numbers look bleak but there is still activity within the Vancouver market, despite the unprecedented upheaval.

“The new listings coming on are in the period since the pandemic broke out and the sales now are mostly transactions written since the middle of March too. There is still a market amidst COVID-19, there are still multiple offers occurring. Even this week and not just on one-bedroom apartments,” wrote Skipworth.

While the situation currently appears dire, the prevailing opinion among economists remains that a rebound is possible in the second half of 2020 and damage may be limited on the pricing side.

“A rebound is expected in the second half of the year as more parts of the economy re-open and demand picks up on low interest rates and pent-up demand,” wrote Central 1 Credit Union Deputy Chief Economist Bryan Yu.

“That said, this will depend on the evolution of the pandemic and how successful government programs are in bridging household incomes through the health crisis. Longer duration of the pandemic and delayed re-openings of the economy could generate permanent damage to the economy as more businesses close and individuals face a longer period of unemployment,” he continued.

© 2019 BuzzBuzzHome Corp.

Here’s How Much Prices and Sales Changed in Each Municipality

other

It’s evident that COVID-19 is having a far-reaching impact on the Canadian economy and healthcare system. Although the Greater Toronto Area (GTA) real estate market was previously gearing up for a busy spring season, policy and physical distancing measures resulting from Ontario’s state of emergency declaration put a damper on much of the expected sales activity. 

The Toronto Regional Real Estate Board (TRREB) noted that the impact of COVID-19 on sales and prices in the GTA appeared muted in March, largely due to strong sales activity in the first half of the month, which was before any COVID-19 measures were implemented. 

To keep a pulse on market activity in the short term, Zoocasa used data from the TRREB to calculate the change in average home prices and home sales between March 16 – April 15, 2020 compared to the same period in 2019 to understand how the market changed across the GTA one month after COVID-19 measures were put into effect, or what TRREB calls the “post-COVID” period in their March market update. 

Zoocasa’s analysis revealed that home sales dropped over 50 per cent year-over-year (y-o-y) during this period in most GTA regions, with the exception of Durham Region where sales dropped 30 per cent. On the other hand, all 27 GTA municipalities except two experienced (y-o-y) price growth.

Here’s a snapshot of where average prices and home sales landed in each GTA region for March 16 to April 15, one month after COVID-19 measures were introduced by Ontario. 

City of Toronto Prices Rise Except in Toronto Central 

For the period of March 16 to April 15, the average sold home price grew four per cent y-o-y in the City of Toronto, ending up at $918,796. A closer look at prices in the region revealed that Toronto East experienced a double digit, 14 per cent gain to $872,658 and Toronto West noted an eight per cent average home price increase to $878,658. Toronto Central is one of two municipalities out of 27 in the GTA where prices declined; the region noted a one per cent drop in prices to $984,332. 

Emma Pace, a Zoocasa real estate agent in Toronto, noted that buyers in the region now face a more levelled playing field. “Although we haven’t seen drastic price reductions, buyers in Toronto have been able to get a few days for a conditional period, which was a rare occurrence pre-COVID,” said Pace.  

Sales on the other hand, experienced sharp declines. The City of Toronto as a whole experienced a 54 per cent drop, with just 1,456 sales taking place in the month since emergency measures were introduced. Toronto Central sales declines were slightly higher than the city-wide average, with a 57 per cent decline and 634 transactions. 

Pace also noted that agents and clients alike are now relying heavily on virtual technology to facilitate viewings and conduct due diligence prior to any in-person viewings. While there are significantly fewer in-person showings for listings with COVID-19 health and safety measures in place, she notes that the ratio of showings that translate to offers is much higher as buyers are only viewing properties at the very top of their list. 

Home Sales in Durham Least Impacted Compared to Other GTA Regions

Home sales dropped 30 per cent in Durham Region with 724 home transactions in the month following COVID-19 emergency measures being put in place. Prices grew a modest 3 per cent y-o-y to $632,227. 

In Ajax, average home prices rose nine per cent to $708,034, but sales dropped 31 per cent. Whitby average prices followed a similar trend, with a five per cent increase in average prices to $690,307 but a 35 per cent drop in sales. Oshawa experienced a seven per cent increase in average sold home prices to $519,955 and a 21 per cent y-o-y sales decline. 

“In mid-March, it felt like buy and sell inquiries came to a halt for the first 2 weeks of the quarantine,” says Robin Pacquing, a Zoocasa real estate agent in Durham. She noted that buyers who are moving forward with purchases understand that they could be in a position where they buy a house conditional on a viewing, but where the offer is made sight-unseen. 

Pacquing highlighted that just like in Toronto, virtual meetings and showings have become the norm since physical distancing measures have been put in place.

In Halton Region, Oakville Sees Double Digit Price Growth 

“Buyers are much more focused on what they are truly looking for”, says Alex Kupiec, a Zoocasa real estate agent in the Halton Region. He noted that under current conditions active buyers are only interested in viewings for properties they consider to be “true contenders.” In the same vein, unless they absolutely need to sell, most sellers have decided to wait out current market conditions to maximize their potential sale price once health and economic conditions begin to improve. 

Sales data reflects this sentiment, with home sales down 54 per cent across the region for the period of March 16 to April 15. That being said, home prices in Halton Region have grown five per cent y-o-y, with the highest increase in Oakville, where the average home price remains over the million dollar mark at $1,059,850. Milton was a close second, with seven per cent growth in average prices y-o-y, but a 56 per cent decrease in sales. 

In comparison, Burlington average home prices remained relatively steadier, with a one per cent increase y-o-y to $783,561; sales dropped 51 per cent y-o-y. Similarly, a closer look at Halton Hills revealed that home prices grew 2 per cent to $785,898 while sales dropped 41 per cent y-o-y. 

Brampton Leads Peel Region Price Growth One Month After COVID-19 Measures Implemented

Average home prices in Peel grew six per cent y-o-y to $800,025 in the month since emergency measures were implemented. Brampton led the pack with respect to average price growth with an eight per cent increase to $768,710. In Mississauga, the average home price was $819,096 after one month of quarantine measures, reflecting a seven per cent y-o-y increase.

Sales on the other hand dropped 59 per cent across the region. There were 355 home sales in Brampton, and 381 sales in Mississauga during the month. 

“During the second and third week of March, the majority of my clients paused their home search due to economic uncertainty, future expectations of price reductions and health concerns,” says Renzo Amorin, a Zoocasa real estate agent in Peel Region. He noted that by early to mid-April, clients who felt more financially stable and already had money saved for a down payment decided to continue their search. 

York Region Experiences Highest Regional Price Gains; Sales Drop Over 50 Per Cent

York Region average home prices grew eight per cent to $959,364, while sales across the region declined by 52 per cent during the period of March 16 to April 15.

Markham home prices grew by 17 per cent to cross the million mark at $1,030,611, even though sales declined by 50 per cent compared to the same period last year. Vaughan experienced one of the steepest declines in sales in the region at 61 per cent and just 150 homes changing hands. The average home price in Vaughan ended up at $1,006,503, marking a 7 per cent increase y-o-y. Home prices inched up by one per cent in Richmond Hill to $973,574, while sales declined 44 per cent. 

As with other municipalities across the region, Claudio Castro, a Zoocasa real estate agent in York Region said that buyers and sellers are relying heavily on virtual technology to complete transactions under current conditions. “The idea is to give the buyer the best access to the property as possible, without putting them or the seller at risk,” said Castro. 

Check out our infographic below to see how average sold prices and home sales for March 16 to April 15, one month “post-COVID”, compare to the same period last year for all GTA markets.

Plus, find our round up of the GTA areas with the highest and lowest price increases, calculated based on regions with at least 20 home sales between March 16 and April 15, 2020 further below.

GTA Municipalities with the Largest Price Increases

1. Markham, York Region

Average home price, Mar 16 – April 15, 2020: $1,030,611

Average home price change from Mar 16 – April 15, 2019: +17%

Home sales, Mar 16 – April 15, 2020: 196

Home sales change from Mar 16 – April 15, 2019: -50%

2. Toronto East, City of Toronto

Average home price, Mar 16 – April 15, 2020: $872,658

Average home price change from Mar 16 – April 15, 2019: +14%

Home sales, Mar 16 – April 15, 2020: 420

Home sales change from Mar 16 – April 15, 2019: -49%

3. Aurora, York Region

Average home price, Mar 16 – April 15, 2020: $961,474

Average home price change from Mar 16 – April 15, 2019: +13%

Home sales, Mar 16 – April 15, 2020: 55

Home sales change from Mar 16 – April 15, 2019: -47%

4. E. Gwillimbury, York Region

Average home price, Mar 16 – April 15, 2020: $869,193

Average home price change from Mar 16 – April 15, 2019: +12%

Home sales, Mar 16 – April 15, 2020: 27

Home sales change from Mar 16 – April 15, 2019: -49%

5. Whitchurch-Stouffville, York Region

Average home price, Mar 16 – April 15, 2020: $1,023,796 

Average home price change from Mar 16 – April 15, 2019: +12%

Home sales, Mar 16 – April 15, 2020: 23

Home sales change from Mar 16 – April 15, 2019: -65%

GTA Municipalities With Largest Price Decreases or Smallest Increases

1. King, York Region

Average home price, Mar 16 – April 15, 2020: $1,184,900

Average home price change from Mar 16 – April 15, 2019: -2%

Home sales, Mar 16 – April 15, 2020: 20

Home sales change from Mar 16 – April 15, 2019: -44%

2. Toronto Central, Toronto

Average home price, Mar 16 – April 15, 2020: $984,332

Average home price change from Mar 16 – April 15, 2019: -1%

Home sales, Mar 16 – April 15, 2020: 634

Home sales change from Mar 16 – April 15, 2019: -57%

3. Burlington, Halton Region

Average home price, Mar 16 – April 15, 2020: $783,561

Average home price change from Mar 16 – April 15, 2019: +1%

Home sales, Mar 16 – April 15, 2020: 130

Home sales change from Mar 16 – April 15, 2019: -51%

4. Caledon, Peel Region

Average home price, Mar 16 – April 15, 2020: $932,810

Average home price change from Mar 16 – April 15, 2019: +1%

Home sales, Mar 16 – April 15, 2020: 29

Home sales change from Mar 16 – April 15, 2019: -72%

5. Richmond Hill, York Region

Average home price, Mar 16 – April 15, 2020: $973,574

Average home price change from Mar 16 – April 15, 2019: +1%

Home sales, Mar 16 – April 15, 2020: 140

Home sales change from Mar 16 – April 15, 2019: -44%

Methodology

Average home prices and sales for each municipality are based on the sold date of March 16 to April 15, 2020 and March 16 to April 15, 2019. Data was retrieved on April 22, 2020.

© 2015 – 2020 Zoocasa Realty Inc., Brokerage

US housing values remain well supported

Candyd Mendoza
other

Even though coronavirus has started to weaken some US markets, other housing markets show no signs of slowing down in home-price growth.

Home prices across the country continued to climb at an annualized rate of 5.8% to a median home value of $252,597 month over month in March, according to the Radian Home Price Index (HPI).

The index also increased by 7.7% year over year, slightly higher than the year-over-year increase of 7.4% posted last month. Radian said that the impact of COVID-19 has yet to materialize on home prices despite the pressure most markets went under in the latter half of March.

“US housing values remained well supported in the early days of the COVID-19 pandemic. While that could change going forward, data indicates that the impact may vary significantly by region and locality,” said Steve Gaenzler, senior vice president of data and analytics at Radian.

The national median value for single-family and condominium homes also rose consistently in the first quarter, up 6.28% due to limited supply and strong consumer demand.

Regionally, the West has the strongest performance, up 6.91% in the first quarter. The South followed with a 6.62% annualized gain. The Northeast lagged at 1.95%, while the Mid-Atlantic was the only region that reported a slight decline.

Metros hard-hit by coronavirus like New York and Philadelphia have shown deceleration in price growth, while Seattle or San Francisco showed no signs of weakness in pricing despite being under shelter-in-place orders for the majority of March.

“Completed real estate transactions in March reveal little out of the ordinary in the real estate market prior to the near nationwide stay-at-home mandates in the second week of March,” Radian wrote in its analysis. “Before then, in most U.S. metropolitan areas, the number of daily closings, listings, and homes going into contract tracked very closely to the same time period in the prior year. In fact, listings sold in March were 5% higher nationally than in the similar 2019 period. However, data reported in the final two weeks of March showed declines of 40-50% in new listings and properties going under contract in some areas.”

Copyright © 2020 Key Media Pty Ltd

Investment in commercial real estate a good choice

Ephraim Vecina
Mortgage Broker News

Acquisition of expansive properties has fallen to the wayside, but commercial real estate is poised to become an even more desirable choice for investment after the coronavirus pandemic, according to CBRE.

This will be particularly apparent in Toronto, CBRE’s recently released “Q1 2020 Canadian Cap Rates & Investment Insights” document reported.

“With internal operational issues consuming 100% of many firms’ time, new investment decisions have become secondary for the time being,” CBRE said. “Term, covenant and existing financing have become increasingly important across asset classes. These factors will continue to enhance or eliminate liquidity for firms moving forward.

“With risk-free interest rates approaching zero, the real estate sector is poised to be an even more attractive investment option once the markets begin to normalize,” CBRE said.

The Canadian office market is ideally placed to exhibit some of the better performances this year.

“After a strong 2019, the office sector had built considerable momentum going into 2020 and was on track to see robust investment activity prior to the market shutdown brought on by COVID-19,” CBRE said. “Given the strength of office fundamentals entering the slowdown, it’s expected that the asset class will be on solid footing when the economy begins to re-open later in 2020.”

Industrial real estate will also prove resilient against the worst economic effects of the current crisis.

“It’s expected that the implementation of social distancing and quarantine measures should increase demand for ecommerce offerings over the remainder of 2020,” CBRE said. “The critical role of industrial assets in omnichannel and global supply chains is only forecast to increase and will ensure the sector remains well supported by strong fundamentals, especially on a relative basis.”

Copyright © 2020 Key Media

Sellers losing significant value in their homes

Ephraim Vecina
Mortgage Broker News

Sellers losing significant value in their homes will be a prominent feature of the market over the next few months, said Stephen Brown, Capital Economics senior Canada economist.

“Given the huge rise in unemployment and the cash flow problems that restrictions on tourism have caused investors in the short-term rental market, it seems likely that there will be some forced sellers in the coming months,” Brown said earlier this week.

These sellers “will inevitably have to accept lower bids,” with much-reduced market activity compelling them to make their properties as attractive as possible.

And while other observers have pointed to the sector’s remarkable resilience in terms of value, Capital Economics predicted a national price decline of 5% by July.

By the end of this month, the market should also brace for “an even steeper fall” in sales to a “small fraction of their normal levels,” Brown said.

Boots on the ground have confirmed that this trend is already well underway: The coronavirus pandemic is shaping up to be a less than optimal environment for home sellers, London agent Joyce Byrne said late last month.

“Maybe they soften their price, maybe they open themselves up to conditional offers. Maybe they’ll be open to accepting something with a home inspection or other financing conditions attached,” Byrne said.

Copyright © 2020 Key Media

After the pandemic households will have more debt

Ephraim Vecina
Mortgage Broker News

The risks to Canadian finances will remain pronounced even during the recovery phase once the coronavirus crisis passes, according to Deloitte Chief Economist Craig Alexander.

“One of the great legacies of the current crisis is that after the pandemic has passed, we’re going to have more indebted households,” Alexander told Yahoo Finance Canada earlier this week. “So I think the issue around leverage isn’t going to go away; in fact, I think it will become more acute.”

Compounding the issue is the still-climbing number of insolvencies across the country, which already reached a record high even before the COVID-19 pandemic took hold of the global financial system. Mounting unemployment is also placing many households’ long-term economic prospects in doubt.

However, Canadians might find a measure of respite: Susan Hosterman of Fitch Ratings said that so far, the impact of the coronavirus is not likely as severe as that observed in the United States more than a decade ago.

“I definitely feel like we’re not going to see the delinquency rates that we saw in the US during the financial crisis. It’s not going to be anywhere near that,” Hosterman said. “I don’t think we’ll see those levels with just how proactive the banks are being with working with the borrowers.”

Copyright © 2020 Key Media