Coronavirus pandemic threatens spring condo launches
At the outset of 2020, concerns abound over whether Toronto’s housing market was at risk of overheating in the coming months. With low mortgage rates, tight supply, strong demand and further rate cuts expected from the Bank of Canada to counter sluggish economic performance, it appeared to be nothing less than a sure thing that we were in for a hot spring market.
With not even a quarter of the year behind us, you’d struggle to imagine a more dramatic change to the prevailing mood. The world is gripped by the coronavirus pandemic and it’s touching every part of the real estate industry.
Just as Toronto’s home builders and their sales team were ramping up for their typically busy spring season, the rapid spread of the coronavirus is now causing a shift in their selling practices and interactions with potential buyers.
Bullpen Consulting President Ben Myers also believes many builders will push back their scheduled project launches by two seasons.
“I’d expect most condo launches to be delayed until the fall. Hopefully construction can continue and developments get completed on time,” Myers said in an email to Livabl.
He also believes that any concerns about the resale market overheating are likely a thing of the past.
“In terms of the resale market, things should cool significantly, which might turn out to be a positive given how hot it was getting,” he said.
As the volatile situation rapidly evolves, Myers was reluctant to give more concrete predictions. “I’m ‘wait and see’ like everyone else.”
For home builder sales and marketing teams in Toronto, it is a matter of adapting the sales process during the era of social distancing and self-isolation.
“We are in a buoyant market and we are well positioned to sell online through our broker portal, and DocuSign has already gained traction during our early launches this year,” said Baker Real Estate President Barbara Lawlor.
The new home sales story was no different on Canada’s west coast, where realtor Steve Saretsky voiced concerns on his blog about new construction market prospects for the spring. New home launches in Vancouver hit a multi-year low in 2019 and were expected to rise this year. This bounceback is obviously now in jeopardy. While concerns about sales and launch activity are obvious, Saretsky called into question the resilience of the new construction funding model in the face of such a threat.
“I’m also thinking a lot about new construction projects, which are capital intensive and often funded using significant amounts of leverage,” wrote Saretsky on his blog.
“Every month sales are delayed, carrying costs add up, putting profit margins under pressure. Further, closing risks are no doubt something to consider, should pre-sale buyers have a change in their employment status upon completion. We are expected to see a record number of new completions [in Vancouver] this year with the number of units under construction at all time highs.”