COVID-19 & Short-Term Rentals

UPDATE (April 23rd) The daily number of bookings for STA’s in the County during the third week of April is down 85% compared to the daily number during the preceding three weeks.

The short-term rental business in Prince Edward County is likely to shrink this year because of the COVID-19 virus. The question is how much it will shrink.

Supply

Through the end of February, the number of STA’s listed in the County was nearly the same as last year.

Because of concern about infection, many people renting a bedroom or two in their own home will probably stop renting as the crisis continues.

However, 87% of the STA’s in Prince Edward County are “whole house” rentals run by an owner who resides elsewhere. With expenses to cover and little in the way of direct personal risk, many owners of whole house rentals may choose to carry on renting

The bottom line: the supply of STA rentals may not fall that quickly.

Demand

Demand is another story all together.

The first COVID-19 case was reported in the last week of January, so the 16% fall in booked nights for February is potentially attributable is likely a reaction to international news about the epidemic.

By the middle of March, the situation had transformed from business-as-usual to a war footing. The WHO declared a pandemic on March 11th and less than a week later, the provincial government declared a state of emergency in Ontario. Schools closed and business slowed to a crawl throughout Ontario.

As if fear of contagion was not enough, it’s widely expected that coronavirus will likely force Canada into a recession.

Between fear of illness and fear of job loss, there is likely to be a major impact on STA demand. The STA statistics for March will tell the full story.

Implications

There are several impacts on the real estate market.

First, with the province under a state of emergency, housing demand is liable to fall dramatically. With the Prime Minister imploring people to stay home, this is not the time when a lot of people will go looking for a new home regardless of low interest rates.

While falling demand with be Canada-wide, the impact is likely to be amplified in places like Prince Edward County. Many of homes sold in the County are vacation getaways or investment rentals which are far removed from the priorities of the day.

Second, as argued above, demand for short term rentals in the County is liable to decline significantly. Between fear of disease and fear of a recession, an expensive weekend in the County will be one of the first things urban consumers cross off their list of thing to do.

Since 2017, I have encouraged STA buyers to have a B plan in case short-term rentals dry up. Many STA owners who count on rental income to pay the mortgage will likely put their properties up for long-term rental. (The County’s long-term rental page is a good place to start.)

Finally, it may seem cold-blooded, but the current crisis may present opportunities for buyers with good health and nerves of steel. Many STA’s that depend on rental income to pay the mortgage may go up for sale at the same time. With all-time low interest rates and a glut of former STA’s on the market driving down prices, buyers will be in a much stronger position that they have been for years.