If March could be summarized in one word it would definitely be turbulent. The month started off with a real estate market that was quickly heating up, tracking at 55% higher sales than the year prior. That all came to a near standstill with the spread of COVID-19. The Federal Government responded with a $107 billion economic aid package. Alongside this, the Bank of Canada slashed its interest rate by a total of 1.5% in the last 5 weeks. With the overnight lending rate now at 0.25%, this makes it the lowest since 2010.
Here are the top stories we’re tracking that are affecting real estate values in British Columbia:
Although it’s hard to find positives in this dire situation, British Columbia has received praise for its handling of the virus: offering a low mortality rate, slow spread rate, and a health care system that has so far been able to keep up. Provincial health officer Dr. Bonnie Henry announced on April 1st that British Columbians should expect current restrictions to remain in place until at least May, but more likely into the summer months. The virus has had a debilitating effect on the economy and continues to limit activity in the real estate market as a whole. We predict that although sales will likely track at multi-decade lows, values will only slightly decrease because of a lack of inventory or new listings.
Canada’s unemployment rate hovered around 5% for the last few years. As COVID-19’s effects spread through the country and thousands of businesses closed their doors, unemployment soared to above 10%. Unemployment is projected to reach 15% across Canada as the virus continues to take its toll on the country economically. It’s estimated that 42% of British Columbia’s workforce will have their wages and salaries negatively impacted. The Federal Government has established a $107 billion economic aid package, under which it has already received $2.13 million EI claims over the past two weeks. The government’s $2,000-a-month taxable benefit will be available to any worker who earned $5,000 in the previous year and whose income drops to zero due to COVID-19.
With the Federal Government’s economic aid package still weeks away from bank accounts, Canadian renters and business owners have opted to either not pay rent or negotiate their current rent price. This is having dramatic effects for landlords of both commercial and residential real estate. From our conversations with landlords, commercial real estate rents were either unpaid or renegotiated on 20-30% of cases whereas residential was understandably lagging at 5% but is expected to grow exponentially as more layoffs take place.