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Coronavirus and the impact to the real estate market

TheSix

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I'm surprised to not see a thread for this yet, but with the stocks plummeting, it will be interesting to see which way the market turns. I think there's an argument for either direction.

A - Stays strong
People still need a place to live and it might be the safer bet to park your money for the time being.

B - Declines
People don't want to move into potentially contaminated space, or visit open houses of showings.

What are everyone's thoughts?
 

dudedmc

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I think Condo's may get hit with this, Who wants to live in such close proximity during a outbreak. I'm saving up to leave Etobicoke and head out somewhere with a little bit of land to have a garden and solar power back up.
Insolvency will be the biggest hit to the housing market with people already on the edge with they're overvalued homes.

I wonder whats going to happen with all these funds the government is handing out to keep people afloat in the long run, interest rates may rise or be dealt with on a individual basis.
 

Roy G Biv

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There is likely going to be a global recession worse than 2008, so there's no way the real estate market won't be affected.

What's going to happen to condo projects that are in the sales phase?

If there is a credit crunch, what about projects like The One that might have tenuous financing?
 

Rimsky44

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There already is a credit crunch. Liquidity is extremely thin right now for banks - it's why the US Fed had to pump trillions into the repo and commercial paper markets to keep it liquidity open. I fully expect new condos without financing will all be delayed. Even those with financing would be negligent to their shareholders to not delay anyways, as construction and the entire supply chain may get delayed. Considering this may wipe out significant portions of loans on the bank's books, it is going to lead to significant pressure on their capital ratios, so the banks aren't going to be actively lending without additional government intervention.

The bigger demand question is, does this change people's fundamental way of doing business - that is, will people choose to live in less densely populated areas and work from home, vs all coming into the office to work? Nobody knows at this point. I assume people still want to be near extracurricular activities, amenities, and schools ultimately.

On a supply side, any condo delays will reduce the units coming on market - is this bigger than the demand hit? Nobody knows at this point.
 

Admiral Beez

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Tourism‘s collapse will force many STR property owners to sell or banks to foreclose on those who overstretched themselves. I’d say this virus may put more housing onto the market, just in time for low interest rates. Those with secure incomes will be ready to buy.
 
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Mr_Dog

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Any thoughts on what's going to happen to pre-construction condos?

Been already seeing notices being sent out for Unavoidable delay due to COVID-19.
 

Rimsky44

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Preconstructions are likely all delayed unless they're already under construction. Developers need to reassess whether they can finish the projects and have the financing.

Those already with financing locked down should be fine - their risk is whether buyers actually can close the transaction when done (given lenders providing mortgages may not be as generous and also equity markets have wiped out significant amounts so mortgages may need to be bigger). If buyers don't close, the developer is left holding the units and the risk shifts to them (if condo prices still rising, no risk....but if market goes down because people can't pay rent, therefore impacting cap rates, it's going to impact the developer's profitability).

Those with financing not locked down are going to delay anyways and see if they can get alternative financing or sell, or wait until market conditions improve.

On the plus side, with all the unemployment from retail/ other sectors, I'm hoping the development costs go down, as labour may be easier to get at this point in the cycle - but that's TBD.

TLDR: A whole big can of "I don't know" hahah.
 

karledice

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Like anything in 2008, a temporary blip or pause and then the demand is being pent up again pushing prices.

My prediction is that the immigration to Canada and GTA and Toronto in particular will not slow down. It will be halted during border closures and travel bans and what have you but in general will pick up the same pace.

If anything Canada is seen safer than China, Iran and Italy, with the 2 already having high immigration rates in Canada. So anyone in those countries on the fence maybe even more encouraged to immigrate after the whole virus.

Real estate has been for sure a buy and hold game.
 

WislaHD

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We have to remember that there is a lot of condo stock still being delivered this year, more than previous years.

I don't see any reason to be overly pessimistic in the long term as (1) this is a crisis we will overcome; (2) people still need housing options in the City; (3) population growth and immigration is still feeding demand.

I think the biggest long-term affects of this pandemic will be:
  • In unit office/studio space will become more desired to enable working from home
  • Mass adoption of anti-microbial surfaces for door handles, elevator buttons, and so on
  • Umm, maybe bidets will become popular across North America to prevent another TP run?
  • Big question mark about condominium amenities, as many people were shocked to learn about their condo gym closing during a time when most people found themselves staying at home
 

TheKingEast

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People will need housing however people will not have employment. A lot of companies will not make it and others will use this as an opportunity to lay people off. I’ve always maintained that the only thing that can harm this market is employment.

Also, people are going to change the way they live. No big gatherings, no close quarters. I wonder if open houses will change?

I think we will see appraisals come in lower and people not being able to qualify for new construction for that reason and also due to job loss.

Market will recover down the road but food luck trying to sell those 300 sqft shoeboxes at $500k a pop
 

tripwire

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I'm curious as to how many/if corporations will see this WFH as being successful, and trim down on their physical offices once the leases are up? En masse, that could have a big impact on the downtown residential market I feel, as being physically close to work would not be much of an issue.

My company has been one that was always very anti-WFH, but so far we have been managing quite well (at least within the departments that I work closely with). Management has also been fairly upbeat during the conference call all-staff.
 

kEiThZ

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The first to suffer will be the AirBnB crew:


Many are trying to structure semi-long term leases. But with dozens of units coming online in every condo, the competition will be intense. And since it doesn't look like travel will recover for a while, they could be cash flow negative for a while.
 

Richard White

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The first to suffer will be the AirBnB crew:


Many are trying to structure semi-long term leases. But with dozens of units coming online in every condo, the competition will be intense. And since it doesn't look like travel will recover for a while, they could be cash flow negative for a while.

I know of a few STR companies who are already giving up knowing that month long leases are not going to be easy to come by. They are pinning their hopes on 28+ day leases but if people are staying 28 or more days a month it will not be in an Airbnb.

With countless corporate rental companies out there STR owners and agents cannot compete in the mid term rental market. Long term leases are already handled well by real estate agents.

Despite their best efforts, STRs will go tits up before the end of this pandemic.
 

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