You’re probably sick of everyone referring to 2020 as an unprecedented year, but let’s be honest... what else can you say about it? COVID-19 has meant a lot of changes in how we live and how we do business, but you’ll be surprised by how it’s affected the real estate industry!
We foresee a strong market for real estate, and we think that you’ll find the ups and downs of the industry over the past year incredibly interesting. You may just find that now is the right time for you to start investing.
A Strong Start to the Year
During 2019, there had been a slight slump in Edmonton’s economy due to lost jobs in the energy sector. Edmonton wasn’t quite as hard-hit as areas like Calgary because of its more diversified economy, but there were still some residual effects.
Fortunately, the beginning of 2020 was a time when we were seeing some turnaround to the economy. Compared to other cities in Canada, Edmonton remains an affordable choice, and this factor was leading both young people and new immigrants to the city. Millennials who grew up in Edmonton are looking to buy their first homes. Those who are moving to the city tend to rent for at least a year or more before making a purchase.
This means there’s a strong demand for both rental units and affordable homes. High-end features like you’d find in brand-new homes can earn investors premium rental payments.
The COVID-19 Halt
Toward the end of March, awareness of the severity of COVID-19 started hitting, and hard. Businesses shut down, and everyone started staying home. People weren’t inviting friends over to their homes due to safety concerns, so inviting strangers to view a home in order to sell seemed out of the question.
During the traditionally booming real estate sales season, sales cooled off to abnormally low levels. For instance, there was a 41.51 percent decrease in unit sales compared to May 2019. People were too busy hunkering down to think about buying or selling their home.
But one thing that the time at home did was illuminate the good and bad things about our current homes. Stuck inside for so long, people were free to spend time thinking about the features they really wanted in a home, and this, we believe, helped set us up for what happened next.
A Surprising Rebound
By the summer, things were turning around. Real estate agents and home builders had worked hard to redesign their business models to fit the new safety precautions everyone has been taking. These include things like the increased availability of virtual tours, self-guided tours, and ways to close on a home virtually rather than through the standard in-person meetings we were used to.
More and more people began to buy homes, and sales in August of 2020 were up 20.11 percent over August of 2019. Clearly, people are starting to realize the importance of having a home that meets all of their needs. You never know when we might need to take these types of precautions again in the future.
Opportunities for Investors
As 2020 comes to a close, there are a couple of trends investors should be looking out for.
Firstly, we are seeing a growing trend of tenants moving out of multi-family and condominium buildings and opting to move into more single-family residential neighbourhoods into secondary suites (basement apartments and garage suites) where they are not sharing entrances, hallways, elevators, and other common areas with many others. They do not really need a larger home and are preferring the quieter and more private spaces now available with secondary suite options.
Secondly, we are seeing a growing trend of families that are selling their homes, pocketing some nice equity, and opting to rent. There are many conveniences for doing this; no repair bills being a tenant as in most cases repairs and property maintenance are the landlord’s responsibility; if you decide you need to move it is much easier compared to selling your home and trying to buy another. In a rental scenario, you can literally give notice, find a new place, and move to your new home inside a 30-day period, avoiding the stresses of the more labour-intensive process of selling a home and purchasing a new one.
Lastly, the recent tightening of mortgage qualification rules are keeping people renting longer before entering homeownership. As the prices of homes continue to rise this will most likely make it even harder for first-time home buyers to enter the market. Young families today find it hard to save a 5% down payment and the relative ease of attaining consumer debt also keeps mortgage qualification out of reach for many.
What do the events of 2020 mean to you as a real estate investor?
Is it time for you to invest and build your long-term wealth with real estate?
At TriUrban, we have local knowledge and expertise, and we can help you find the property that’s right for you. Give us a call today to find out more!