The coronavirus outbreak that originated in the Chinese city of Wuhan has already had a significant effect on life beyond China’s borders, with cases springing up around the globe and an increasing number of travel advisories being issued.
As the death toll tragically rises, anxiety is running high over whether the virus will continue accelerating its spread across China and reach public health emergency status in other countries. These worries will have far-reaching economic impacts at the local level for 2020, including on the Vancouver housing market’s performance.
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With Chinese nationals still making up a considerable proportion of Vancouver real estate buyers, there’s little doubt that the coronavirus will impact market activity in the first few months of 2020 and potentially beyond.
Vancouver realtor and blogger Steve Saretsky believes the new condo and luxury segments of the market will get hit hardest by a drop in sales.
“[T]he local impact on cities such as Vancouver could prove challenging, especially for some luxury condo projects hoping to cash in on a wave of buyers this time of year,” wrote Saretsky in a blog post published earlier this week.
“Vancouver developers have been ramping up advertising, promoting a bevy of incentives and discounts for Lunar New Year shoppers. Chinese New Year is typically viewed as an opportune time to clear existing inventories. However, new home sales could prove disappointing this year with many Chinese buyers grounded,” he continued.
Saretsky is referring to the fact that Chinese tourism has seen a drastic dip since December as fears over the coronavirus took hold and the country’s government began quarantining millions of people in major cities stricken by the illness.
“Chinese tourists, the biggest source of outbound travellers worldwide, spent $130 billion overseas in 2018. Chinese tourists are also the world’s biggest spenders on luxury goods, snapping up everything from fancy watches and handbags to Vancouver condos on overseas trips,” he wrote.
Beata Caranci, chief economist at TD Economics, wrote that, at the global level, there will be heightened market uncertainty and an increase in volatility as the virus spreads. While it will eventually level off, this sense of uncertainty will filter down into local markets in a variety of ways, including the hit Vancouver’s new condo and luxury markets will likely take in the first few months of the year.
“All told, we maintain confidence that the swift response of authorities globally will arrest the evolution of the outbreak with time,” she wrote in a note earlier in the week.
Using the impact of the 2003 SARS epidemic as her framework, Caranci said the coronavirus would cause a small disruption to Canada’s economic growth for the year, with most of the impact being felt in the first quarter.
“There’s little doubt that confirmed cases will continue to rise globally in the near-term, but Chinese authorities have demonstrated a swifter and more transparent response than the SARS episode, both domestically and in alerting the World Health Organization,” she wrote.