This March 20th UPDATE shares our understanding and experiences in the New Housing market and how we are adapting.Also, I just participated in a podcast hosted by Matthew Slutsky of Buzz Buzz Home and Saul Colt at Idea Integration. Click here to listen to this podcast.
The following summary is about adaptation and how the industry is reacting to COVID-19:
- The number one rule is to be sensitive and sensible….have a quick review of all your automatic internet responses…make sure the wording is sensitive to the current scene…same with your ads and your social media…and create sensible options for your customer to communicate with.
- Most all new home sites have gone to an appointment only approach. The site may in fact not be open, but connectivity continues with a help line to purchasers and prospects. I wouldn’t stop all ads…in fact increase your social media…great time to humanize…connect with purchasers and prospects with a message of concern and a plan going forward…we care about you and are still open for business.
- Set up all sites with Zoom…free service ….to connect as video conferencing with you and the sites. As well as your sales teams with their purchasers and prospects.
- PDI’s are being done by the Builder without the purchaser present…Purchaser does their own…before closing with a lockbox on the home or unit…and later the Builder warranties to fix all items…when we are back to work…then later meet with the purchaser to review and resolve…all construction appears to be continuing onsite uninterrupted. All trades want to work but some may be self-isolating so expect delays in closings through the next several months. The next 60 days may not be affected but Tarion has a pandemic clause that triggers unavoidable delays. Declared on March 11 th, it allows the normal requirement of a 90-day notice of an extension to be voided…and a new closing date then will be flexible and fixed as the Declaration is withdrawn…communication with your purchaser is critical.
- Closing delays may be requested…some are being granted with increased deposits…connecting with a help line to your purchasers is key
- Cancellation requests are first being dealt within a 10-day cool period in condo or during any finance condition…. some by extending the finance condition to 30 days…we want to encourage the buyer to stay with us through this ‘isolation” period.
- Ottawa will be somewhat less hard hit from this crisis due to Feds and high tech… the GTA will see activity dramatically reduced on the new home front in the next three months…the appointment process will produce sales but at a fraction of traditional absorption rates….but many people may re-calibrate their housing needs and response when the downside of the curve happens….this will be some time in towards end of April to early May….if we can believe China their outbreak began in earnest December 6 ….peaked in February…and yesterday there we no new cases in Wuhan (so a three month period) a similar time line would be mid-May for Ontario.
- Recovery will start slow…as uncertainty will create confusion and inaction…..it is important that the Banking community will allow ‘payment holiday’ on mortgages…this is critical to avoiding massive defaults and a spike in resale listings as the downside of the curve emerges. So, the buyer will re-enter the market cautiously…our job will be to instill confidence with great communication and a clear plan to adapt to their needs…
- It may be several months before Immigration levels are allowed to return to the 400,000 annual level….and may not be reached again for several years…so a softening of demand here will be evident…..but offshore investment will strengthen dramatically as Asian and South Asian money tries to find security in Canada. Interest rates are at 2%!!! And supply hasn’t changed…still very tight. The first Builder to deliver the message of “Home as my castle”, the ‘Forever Home” the place to “Cocoon” to protect my family ….will hit the emotional hot button…but careful…this has to be sensitive to timing…there is no Corona Discount, or COVID-19 Special…insensitive!!!
- So, look for several months of slow recovery starting in May and then a V curve upward in September as a surge in pent up demand occurs.
- Effectively we will take 3 months of absorption out of the market…March, April ,May…so about 1800 in Ottawa and nearly 10,000 in the GTA……and at least half of that will be recovered in the fall….so annual absorption may be closer to low 5000’s than the low 6000’s we projected LAST WEEK !!! Our projections for the GTA for 2020 were in the 30,000-unit range and may only achieve around 22,000 by year end. Still good… but naturally affected by the virus…and full recovery in 2021. Yes, we may technically be in a recession…’two consecutive quarters of negative GDP’…but short lived and maybe quite irrelevant to real estate in the longer term.
- The way we do business will change… on-line sales and communication is upon us. We are planning launches now by webinar and connectivity by appointment, one on one or small groups and maybe not at site but also online….with deals done on Zoom , face to face, APS can go on the screen and be completed by DocuSign….Fintrac and ID still have to be done in person but we can adapt a program for that. It will be very interesting to see the results of an appointment process now underway by Paradise in Brampton…it will be a real test of the consumers confidence.
- Finally, the story is about caring, if we connect from our Builders to our prospects and purchasers to simply ask how are they doing that’s a great humanizing approach…and set out a help line to connect….reinforcing that we are still open for business …but are sensitive to the current conditions….wishing them well, and any questions just call our “Housing Help Line “
As I see it the “Corona Crud” will cause a conversion to online sales. It will become the trend and by summer may be quite commonplace. How we humanize this conversion will be critical to our success.