Can I buy a home during COVID? ls it literally feasible?
Yes, you absolutely can buy a home during COVID 19.
We feel that following the directives of the BC Centre for Disease Control. WorkSafe BC & Dr. Bonnie Henry’s advice we can help our clients safely buy and sell real estate in Vancouver.
When working with you, what steps are in place to make sure I’m safe?
We have an agency relationship with our clients and our number one priority is their health, welfare, and well being, while getting them the best deal possible. We follow the WorkSafe BC (see their protocols for Real Estate Below) & BC Centre for Disease Control recommendations and are listening to what Dr. Bonnie Henry says. We’re keeping up with what is required of us – I wear a face mask and gloves, wash and sanitize my hands, and keep social distance. We will do anything and everything we can to keep our clients safe and healthy – we want to be part of the solution, not the problem.
Please see our page on what we are doing to keep our clients and the community safe when buying real estate during Covid19.
Is everything virtual? Will I actually be able to walk through homes?
We are able to show properties, as we’re deemed an essential service. Of course, this is done with the proper precautions (masks, hand sanitizing, social distancing, etc.)
Are interest rates better right now?
Interest rates are quite low right now, but will be getting lower in future and here is why:
Canada’s big banks are not passing on the huge discounts given them by the Bank of Canada because they want to build up some capital reserves in case the economy gets worse. That said, as the economy gets going again and the banks are not as worried about defaults they will pass on the ultra low interest rates.
Ultra low rates will support and quite possibly push real estate prices in Vancouver. For more on why I think this is, read below.
Will Covid 19 Cause Real Estate Prices to Fall in Vancouver
Central banks and governments are creating a variation on what’s called the wealth effect, which is the change in spending that comes with a change in perceived wealth. This is the same process that was used during the 2008-2009 financial crisis. They’re pumping mass amounts of stimulus into the economy in the form of extremely low interest rates and quantitative easing from central banks (a fancy term for printing money).
Central governments are borrowing mass amounts of money to keep spending high in the economy so that the value of people’s stock and real estate portfolios is maintained or increased. The reason they’re doing this is so people continue to feel comfortable spending. This will help avoid the deflationary spiral that we saw at the start of the Great Depression (around 1929-1932). What happened was the value of everything went down and so people stopped spending – it became a self fulfilling prophecy. Under normal circumstances, central banks and governments would never do these things because of the chance of moral hazard. However, in extraordinary times like we’re in now, this is how nation states deal with crises and shocks to demand.
I have been optimistic throughout this crisis. We saw prices dip a bit for certain properties when there was tons of bad news, but prices are starting to recover. Volumes went down dramatically but we’re now starting to see them ramp up. I’m very optimistic and people who buy properties now will do well.
A lot of people I’m speaking with predict real estate prices will fall, but I don’t believe that’s the case. I do think housing affordability will improve because of ultra low interest rates, not because of low prices. Right now, Canadian banks are not passing on discounts they’ve been given in the prime interest rate by the Bank of Canada because they’re building up stability. But, as things come back, they will stop holding onto that premium as they get more comfortable with the market situation and realize it’s not the end of the world. We could see rates under 2% for a wide range of mortgages, which is very inexpensive – inflation is 1-2% so, if that’s your mortgage rate, you’re getting the money for free!
What happens to Vancouver Real Estate during a Second Wave of CoronaVirus?
If there’s more bad news like a second wave with the virus, governments will be proactive. Governments and central banks have done a good job of reacting to this crisis from a financial perspective. We’ll do well.
We can compare and contrast with events of the past – the 2008 financial crisis, the second world war, and the great depression. The war resulted in horrific tragedy involving cities being destroyed and people dying – horrible things. The financial crisis was caused by underlying financial assets that were questionable and toxic – nobody knew where they were.
Just prior to COVID-19, we were in a situation where the economy was improving, Vancouver real estate prices were rising, and sales volumes were up about 45%. The market was positive and I think that positivity will come back. People want to live in Canada and Vancouver – our economy is doing really well. We are dealing with a health crisis, rather than an economic or financial crisis – humans are adaptable, we figure things out and we’ll figure this thing out – influenza and the common cold are coronaviruses and we’ll figure out a way to deal with this. It’s not the end of the world.
Are sellers more likely to sell right now?
Some sellers are waiting on the sidelines as they’re concerned the market isn’t actually as good as they think it is, but doing this constricts supply and makes it easier for sellers. I’ve seen panic sales with low prices before but we’re not seeing this across the market – prices are firming up and volume is coming back. It’s not all that bad. Volumes are down but prices have not been hit hard in Vancouver.
However, it’s different across the country. The CMHC says prices will be down 18% across Canada, which is ridiculous considering the 37,000,000 people across 9,000 km with dramatically different city and regional variations of real estate markets, immigration flows, and economics. That article and report are a bit irresponsible and CMHC can’t predict the future, and this prediction has since been criticized by the industry.
Will the home buying process be slower because of COVID-19?
Yes, this is happening and the process is slower. There’s more friction in the system for everybody so there are delays but sales are still happening. But, eventually we’ll figure out a way to make the friction and delays go away. Humans are adaptable – it’s not killing deals so it’s not bad.