There’s no question that the COVID-19 pandemic is impacting real estate markets – it only makes sense as the financial world has been turned upside down. But understanding what changes are occurring may not be immediately obvious – there are many ‘submarkets’ at play within the real estate market, not all of which are seeing the same impact. To gain some insight into the local market to assist in determining if this is the time to sell your house, it’s worth discussing some trends which are driving change.
Remote Work Quickly Becoming More Widely Accepted
Many people have been forced to work from home who previously worked from offices. Such is the case with countless professionals, many of whom only months ago would have indicated this was not possible nor ideal. Changes that were thought to be years off were suddenly a reality, and while the business world scrambled to react, months later, it’s become the ‘norm’. How eager people will be to return to their offices remains the big question?
There are many factors including the re-opening of schools/daycares, the government’s ‘back to work’ strategy and the potential for additional outbreaks or ‘waves’ in the weeks/months ahead. Simple math confirms that the government cannot continue to hand out record amounts of cash – we need business and industry to start generating ‘value’ that can be taxed. While some of that needs to occur ‘on location’, we’ve also learned that working remotely has become a new norm for many. Will this drive more people away from the GTA to Peterborough in search of real estate? My guess is yes.
Social Distancing is Easier
In Peterborough, we were very fortunate to not experience large numbers of people falling sick to COVID-19. While there are many tragic stories locally, the facts are that Toronto and the area saw a bigger impact, based on bigger populations. The Peterborough area is less densely populated, a more ‘suburban than urban’ population, and this has resulted in less community transmission.
I also believe the demographic profile of a ‘retirement’ community supported social isolation. I’m sure there are many factors at work, but the facts remain. Peterborough continues to be viewed as a ‘safe’ place by our neighbours in the GTA. While we ‘locals’ may take safety and security for granted, it’s become an important consideration is establishing where people choose to live. I’ve had clients wanting to purchase Peterborough real estate based on our safe and healthy community.
The Rental Market Continues to Grow
Rental opportunities continue to drive the market for properties under $450K. With a reasonable down payment and low-interest rates, many boomers are looking to Real Estate as a safe investment. This argument has two interesting yet opposing angles – there are those that believe the stock market correction has positioned it as the best value for new investment while others, feeling the pain of portfolio equity loss, are much less confident of the stock market moving forward.
However, before you get too excited about rental property potential, it’s important to recognize it does not come without much effort and risk. Finding the perfect tenants can be challenging and managing rental properties even more so. I’ve had several seasoned rental property owners share than given the ‘tenant headaches’, tax implications and overall ‘stress’, they wonder if ‘blue-chip, dividend’ stocks still don’t look really good. Unfortunately, COVID has redefined the term ‘blue-chip’….but it’s worth considering if “landlord” is the right role for you?
More Value for Your Investment
Real estate has historically been a safe place to build equity, but it’s suffered its setbacks as well. To suggest that real estate is always safe is ignoring the lessons history shares. We’re seeing markets cooling off in the GTA and price drops. Locally, the data is difficult to interpret as COVID-19 has shattered the lens. While residential prices have shown stability, we are seeing increases in the average days a house is on the market despite pent up demand. While many entry-level properties are still experiencing multiple bids, other quality homes are not moving as expected.
Overall, Peterborough has needed more inventory for some time and new homes are not a product than can be quickly ramped up as permits and infrastructure are needed first before shovels can go into the ground. However, these processes have been underway in both Peterborough city and surrounding communities for some time and we will soon see dramatic increases in new home development. The factors of supply and demand are always at work…
Consumer Confidence
Finally, employment security or “consumer confidence’ is one of the single biggest factors in driving the Real Estate market. People who are confident with their jobs and income are comfortable with increasing debt while those who are worried are less likely to undertake loans. COVID-19 has placed many people’s incomes in jeopardy and this will affect consumer confidence not to mention the bank’s willingness to extend credit. While there are some interesting opportunities for individuals to purchase real estate, the financial markets may make this tough. Some studies link higher unemployment numbers with a decline in house pricing – for every 1% increase in the unemployment rate, a 4% drop in home prices.
So what’s it all mean? My personal opinion is that locally, real estate values have yet to react to the effects of COVID-19 on the economy, partly a result of the dynamics at play within our market, and more likely resulting from government programs that have attempted to ease the hit. These programs cannot sustain over the long haul. As a short term investment, real estate may not continue to see significant growth, but over the long term, it’s proven to be a safe haven. For those thinking of selling in the near future, I would personally try to hit the market sooner than later as the uncertainty of the months ahead present risk.
These are my personal opinions and by no means represent financial advice or direction. I always caution clients to seek advice from their professionals including accountants, investment advisors and lawyers.
If you’re considering the sale of your house, I’d be happy to arrange a chat and discuss a Real Estate Strategy that aligns with your needs. Of course, market evaluations are included but a good strategy for maximizing your investment and selling your Peterborough home goes beyond price. Feel free to call me at 705.933.9191.