Amid the uncertainty that the pandemic brought to the Canadian, there might be a silver lining for renters and home buyers. When the lock down is finally over, which will most likely happen soon, renters and home buyers will deal with a more reasonable house market. This will happen because of the sudden decline in tourism that affected the industry globally in the past few months.
The current Airbnb position is very delicate. Because of the pandemic, most travelers do not feel comfortable in staying in other peoples’ homes. Also, some condos are banning Airbnb listings, since the tenants do not want having travelers coming from overseas all the time. In addition to that, Ontario and Quebec banned short term rentals, which are the main core for Airbnb rentals.
Even before the pandemic, Airbnb owners were already facing a new reality. Back in November, a new Toronto by-law came into effect, stating that homeowners were forbitten from renting out properties in Airbnb, except for the primary residence or rooms in the primary residence. This new rule was put in place in order to avoid owners to buy blocks of condo buildings and rent the units in Airbnb. This practice is believed to increase housing costs for residents and led the creation of “ghost hotels”.
This change came without many media attention, but it definitely affected the Airbnb business in Canada. According to Host Compliance, the ghost hotels mentioned before were part of 30% of the homes listed in Airbnb, but it also represented 80% of the company’s revenue. With all that said, even before the pandemic, the Airbnb industry was already facing a potential collapse in the Canadian market.
Some believe that Airbnb hosts will probably sell their units since they will not be going to hold on in the rental market. Because short-term rentals bring more earnings than long term rentals, it is not interesting to hold on to the units for a one-year lease, for example. Specially if the Airbnb owners have to cover a large amount of mortgage. The rent charged in these units might not be enough to cover the mortgage monthly payment. So, it is better for the Airbnb owners to sell those units, since it would be more profitable for them.
As a result, there was an increase of 8% in listings of homes for sales back in March. Since now more houses are on sale, there are not as many individuals willing to buy at this moment, which decreases the housing prices.
What will happen with Airbnb?
It is hard to predict how this new scenario will help buyers and renters, specially with the economic turbulence that Canadians are facing at the moment. There is not enough data yet to be able to give a more certain prediction.
The question is, even with the Airbnb situation, which can mean a more affordable housing market, a decline in Airbnb would be a good thing? In a time of economic crisis, many people could generate additional income by renting out a second property or a room in their home on Airbnb.
It’s for this reason that some believe that these restrictions like the ones in Toronto and Vancouver are useless. Because of all the newly unemployed people, cities will be open to compromises as to how people make money on Airbnb. Airbnb is an economic engine and economic activity will be the new topic of conversation.
Some argue that there is still hope that people are going to be able to recover their business by the end of summer. But some people might not be able to pay their mortgages in August, then we will might see people giving up hope.
For many people struggling with rising housing costs in Canada’s priciest cities, the moment Airbnb owners give up hope might be the moment they can start hoping once again.
If you are looking to refinance or purchase a home over the next few months, contact us today at 877-296-2696 or email us at info@homemortgageadvice.ca.