So, is the real estate bubble finally popping? Well… not necessarily. There may be headlines claiming a real estate armageddon, but everyone has their own thesis. In this article, we reflect on what some of the top experts forecast for the future of the Canadian real estate market. We also review the factors steering us away from the idea that the real estate market is about to burst.

What is Everyone Saying About the Future of Canadian Real Estate?

There has been no shortage of predictions and research reports on what to expect in the near- and long-term of Canada’s residential real estate market. The CEO of Canada Mortgage and Housing Corporation (CMHC) provided a gloomy outlook on what’s to come. In a testimony to the House of Commons, he predicted that home prices could fall between 9-18% over the next year. One of the major fears that Siddall had was a “debt deferral cliff”, where mortgage deferral programs would come to an end and Canadians would need to start making payments again — whether they have the income to or not.

Not all experts agreed with Siddall. RBC forecasted that housing prices may decline 5% compared to last year; CIBC forecasted a 5-10% decline; and Moody’s, a financial services and research firm, estimated an 8% decline in Canadian real estate prices. And, in a surprising turn, TD predicted that home prices may increase by as much as 13.8% in some provinces by the end of 2020. While a 5-10% decline in housing prices is still significant, it’s nowhere near the possible 18% that Siddal had in mind.

Currently, CREA and other real estate boards have not reported significant declines in real estate prices, despite sales activity plummeting across the country. Not only has the pandemic resulted in fewer Canadians looking to purchase a property, but it has also delayed those looking to sell. Once restrictions of social gatherings and the threat of Coronavirus lifts, we may see momentum return to the real estate market on both the buyer and seller side.

Why We Likely Won’t See the Real Estate Bubble Pop

There are plenty of uncertain factors. For example, we don’t know how long social distancing measures will last in each province. We’re also unsure of how long it’ll take before we find a vaccine for Coronavirus. The longer social distancing is required and the longer a vaccine takes, the more negative effects we’ll see in the real estate market.

However, many factors point towards a healthy market once the COVID-19-era passes. This includes pent-up demand and supply, low-interest rates, and delayed housing inventory.

Pent-Up Demand and Supply

Many individuals hoping to buy or sell their home are waiting until Coronavirus ends. With the pandemic in place, it’s much harder to go through the whole process of hosting open houses and finding a home/buyer. This is one of the reasons why the price of residential units sold did not drop significantly or at all — because supply and demand for real estate declined in equal parts. As a result, it’s reasonable that sales activity will skyrocket once social distancing measures loosen up.

Further, the high cost of properties in cities such as Toronto and Vancouver is the result of a limited housing supply and high demand. The COVID-19 situation is neither reducing the demand nor increasing the supply — the ingredients required to pop the bubble. Instead, COVID-19 is reducing both demand and supply.

Low-Interest Rates Mean More Demand

When interest rates are low, demand for property goes up as it’s now cheaper to borrow money and purchase a property. Due to the Coronavirus pandemic, the Bank of Canada in March cut interest rates significantly and is currently holding it at 0.25%. This results in less costly mortgages (for the most part). Although we continue to see more uncertainty, these low-interest rates could drive even more demand in a post-COVID-19 world, meaning prices will only go higher if supply remains the same.

COVID-19 Has Also Stalled the Supply of New Homes

The construction of new homes is one way that the market can increase its supply of residential homes.  Although most construction is still permitted, the requirement for construction workers to socially distance themselves onsite has ultimately reduced productivity. In the prior mentioned report from CIBC, it estimates that social distancing regulations and the lag in overseas shipments have reduced construction productivity by 40%. This will ultimately result in a reduced supply of new housing.

What Factors Could Lead to Weaker Real Estate Prices?

Coronavirus has also birthed factors that could reduce demand to the point that prices may fall in the future. Due to the mass unemployment and rustles in the stock market, Canadians might prefer to delay their purchase of significant investments such as a home. Further, buyers who think that real estate prices will crash could be holding off until prices come down. Both of these factors could result in less demand. Although the unemployment numbers may point to a weaker economy, many of these jobs are layoffs. Companies that did lay off employees will likely rehire them once society recovers from the pandemic.

Many of the large Canadian banks predict that real estate prices will decline a few percentage points. This decline is possibly a market correction but not the bursting of a real estate bubble. Pent up demand, low-interest rates, and delayed new constructions could even result in higher real estate prices — not lower. There’s likely still time before a Coronavirus vaccine is found, but when it is, both buyers and sellers will be back in action!

The post What the Canadian Real Estate Market Could Look Like After COVID-19 first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

Most people are looking for a scare this time of the year, what with Halloween creeping up on us. We pop in scary movies about ghosts, monsters and haunted houses. But, would you actually want to live in one?

When it comes to buying real estate — and, it may seem like the last thing to worry about — how much do know about that home’s past?

A lot can happen in a home that can affect the value in a sale; from mildew and water issues to grow-ops and even murders.

Barry Lebow, a specialist in stigma and agency matters, and contributor to the Real Estate Magazine wrote that “stigma is the effect that lingers after the cure.”

Stigma, Lebow says, can be real or perceived. This means that a home that is viewed negatively upon by neighbours and the community, such as a murder house, can be just as stigmatized and devalued as a home with a mould problem.

“Sometimes public opinion or word-of-mouth can result in the highest loss in value,” he writes. “Once the community knows of a problem, from a murder in the house to a grow-op, the word is out.”

Once that word is out, the home will be a tough sell for any agent. This may result in a reduced ticket price to a longer stint on the market. But, are Realtors and sellers required by law to disclose this kind of information to potential buyers?

In the U.S. there are laws that require sellers to disclose whether there has been a suicide or a murder within a property, so long as the seller knows about such an incident within a three-year period.

Meanwhile, in Canada, the rules are vague. Lebow states that in Canada only Quebec has a murder disclosure law. CBC reports there are no laws that state disclosure is a must. Rather, the responsibility seems to fall on real estate organizations in charge of creating the code of conduct for the region’s Realtors.

The Ontario Real Estate Association (OREA), for instance, “takes the position that, ‘when in doubt, disclose.’”

“Realtors are held to a higher standard than the general public and have an ethical obligation to disclose,” Cassandra Agnew Walker, senior manager of standard forms, tells OREA.

“When in doubt, we suggest that OREA members disclose a stigma because it is better to be safe than sorry,” she continues. “If a Realtor doesn’t disclose a stigma, there may be a lawsuit or a complaint to RECO (Real Estate Council of Ontario) afterwards. Disclosure is a way to prevent that argument and hassle later on.”

The Real Estate Council of Alberta states that it is up to the seller to decide whether or not to disclose a possible stigma to a potential buyer as they are not legally required to do so.

“If a buyer asks you about possible stigma, and if you choose to answer, you must do so honestly,” the website reads. “You cannot lie to potential buyers about stigma.”

It also adds that the seller’s real estate professional can’t disclose that information without their permission either, so really, it falls on the shoulders of the seller.

In the case of 11 Butler Crescent N.W., Calgary, for example, the seller decided to leave the stigma out of the listing. However, the stigma attached to this particular address is a pretty hefty one. This is the home where on April 15, 2014, then 22-year-old Matt de Grood was arrested after stabbing five young adults to death at a house party.

Sylvia Santarelli of ReMax Hallmark Realty told the CBC in February the value of a house will be affected if it was the location of a murder and covered in the news a lot. But, she says, the value will be affected “in the sense of there might be less people bidding on the homes.”

The Brentwood house in Calgary, however, sold only two months after it was put on the market. That was only four months after the city’s worst mass murder. It was purchased by a young 23-year-old man for $425,000 who knew of the tragedy that occurred within the home, but he wanted to buy it back for the community. Help rid it of some of that stigma, sort of.

He purchased the home for $64,000 under the asking price and said he would leave the memorial for the five lives lost standing in the front yard.

So, ultimately, most stigmatized homes sell. They do. But how can you sell them?

Although there is no law saying stigmas must be disclosed, sometimes it’s best to go with the “better safe, than sorry” mentality.

After all, Realtors are looking after the best interests of their clients, whether they are representing the buyers or the sellers. If there is a possibility of trouble being uprooted after the sale is closed, the Realtor representing the seller would (most likely) recommend disclosing stigmas associated with the house to prevent future issues.

As a buyer, it’s important to do thorough research on the property. Google it, search for the address in local news websites.

And be clear while speaking with your Realtor. Let them know what stigmas you would be comfortable with, and which are absolute dealbreakers. Perhaps living near a graveyard would be OK, but living in a home that was a former grow-op — even though it has been cleaned and cleared up to code — is an absolute no-go.

But keen-stigma buyers must keep in mind that they may not “scoring” that deal they think they might be by purchasing a home with history. Most times the home is listed for the same market value it’s worth as long as the stigma associated with the home does not harm health, safety or security of future owners and residents.

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