Back in 2003, Toronto experienced the SARS outbreak and it makes sense to look at how it impacted the real estate market to get a good sense of the likely impact of the coronavirus this time around.
Let’s start with a recap of the SARS outbreak and its impact, courtesy of Global News.
In March 2003, Severe Acute Respiratory Syndrome – better known simply as SARS – first hit Toronto, beginning several months of public worry about the growing outbreak.
March 2003 was the month that SARS first impacted the city of Toronto. Seventy-eight-year-old Siu-Chu Kwan, who had just recently returned from Hong Kong, died of the virus in her Toronto home. Her son, Chi Kwai-Tse died at Scarborough Grace Hospital from the SARS virus just a week later.
The World Health Organization (WHO) and Health Canada also announced alerts about the virus during March 2003.
Two weeks after the death of Siu-Chu Kwan and with approximately 18 Ontarians infected, Health Minister Tony Clement declared SARS a reportable, communicable and virulent disease giving health officials power to track infected people.
On March 26, the province declared a public health emergency and requested that thousands of people across the province quarantine themselves.
In an effort to quell the spread of the virus, the Ontario government closed all hospitals to visitors with the exception of those visiting critically ill patients and parents visiting children.
On March 28, another person in Ontario died of the virus.
By April 1, a total of six people had died of the virus in Canada.
The death toll climbed through April prompting the WHO to issue an advisory suggesting travellers refrain from non-essential travel to Toronto.
The travel advisory was repealed just a few days later but managed to significantly damage Toronto’s tourism industry which lost approximately $190 million during the outbreak.
In May, WHO removed Toronto from its list of affected countries.
So what happened to real estate during that time?
While it was an ongoing concern globally for some more time, in Toronto we really saw its impact in March, April and May of 2003.
When we review the market activity from that time frame, we don’t see it having a big impact on prices or activity.
The chart below shows both of those for Toronto for 2002, 2003 and 2004.
The green line is average price and the grey line is number of sales. The red bits are during the SARS outbreak. The solid bits in 2002 and 2004 are the same March, April and May periods in the year before and after SARS. This allows us to see if 2003 was atypical.
Here’s what the data tells us.
Prices typically go down in March a bit, before the spring market pushes them back up in April and May.
We saw that in 2002, we saw that in 2003 during the SARS outbreak, and we saw that in 2004.
SARS didn’t change the overall pattern for sale prices, but it did slightly slow down the increase in April. Typically we see a big increase in April, followed by a smaller increase in May. During SARS, we saw a small increase in April, and then a bigger one in May.
The lesson? When people are uncertain, it shows up in a more cautious version of the typical trend.
The chart also shows us the number of sales. We always see variations in how many sales take place in a given month but there are certain common trends.
The spring market typically sees more and more sales in each subsequent month, with March being busier than February, April being busier than March and May being busier than April. By either June or in some years, July, we see things slow down a bit with fewer sales over the summer.
During SARS, we saw a very typical pattern, with sales as described above. Overall, sales were down a bit, but not to an extreme amount. In 2002, that three month period saw 9,713 sales in Toronto. During SARS, the number dipped slightly to 9,222. In 2004, it was busier, with 10,756.
The lesson? Don’t expect a dramatic drop in activity but we may see slightly fewer transactions than normal as those impacted by the outbreak or worried about the impact wait and see what happens.
The data from back in 2003 when SARS was the issue tells us a bit about how Toronto reacts to a health scare. It resulted in a slightly lower than normal price increase and sales volume.
The coronavirus is obviously its own situation and the economy and the state of the real estate market leading up to this pandemic will of course influence the impact of it on Toronto’s sales activity and prices.As many media stories have already pointed out, government reaction to the economic impact of the coronavirus will influence what happens in our real estate market. A lower Bank of Canada overnight rate and increasing downward pressure on bond rates means lower fixed and variable mortgage rates, giving buyers more purchasing power.
Forecasts of a recession in the later part of the year mean uncertainty for income for a number of sectors in the economy, which can push some potential buyers to decide to sit out for another year or so.
While forecasting is a difficult business, we feel confident in saying that the coronavirus is not going to cause a tremendous shift in the real estate market in Toronto or the GTA. The resulting changes will positively impact some plays and negatively impact others.
If making a purchase or sale makes sense for you now or in the near future, what is happening shouldn’t change that. If you’re waiting for a market crash due to the coronavirus, you’re going to miss out on another year of growth in real estate value.