It’s now well-known that homebuyers are leaving urban markets for the suburbs in droves in search of larger and more affordable properties.
While homebuyers have been trading in big-city life for more affordable living in outlying regions for years as prices have risen, the pace picked up substantially with the onset of the pandemic and the widespread adoption of working from home.
Over a 12-month period ending July 2020, Statistics Canada reported that Toronto saw a net intraprovincial outflow of more than 50,300 people, while Montreal lost nearly 25,000 people to other parts of the province.
It makes sense that many are placing a higher priority on more spacious homes and properties away from the city during a pandemic—particularly those who are able to work from home. But the question is, how sustainable is this trend?
Not very, according to Benjamin Tal, deputy chief economist at CIBC World Markets Inc.
"The phenomenon of moving out of urban centres makes complete sense at the moment,” he wrote in a recent report. "With real estate in Canada’s largest cities becoming increasingly unaffordable, and working from home now the norm for many, why not move to a cheaper locale where you might be able to buy your dream house for a fraction of the cost?”
Tal notes that beyond the first 50 kilometres, every 10-km drive further from the city allows a homebuyer to afford $25,000 more house.
And that’s exactly what people are doing, which in turn is driving up home prices in more remote communities, in some cases well beyond the suburbs.
In January, for example, rural areas in Ontario such as Quinte & District (+32.6%) and Tillsonburg (+33.3%) led the way in annual average house price gains, according to the Canadian Real Estate Association.
The Trend is "Unsustainable”
With such rapid price appreciation, one has to ask how much longer suburban and rural areas will maintain enough of a house price advantage over the big cities to entice people to move?
"…prices in those centres have been rising so fast already that they risk reaching a resistance level, in which the premium paid to live in a big city has narrowed enough to trigger second thoughts about moving,” Tal notes, adding "that might already have occurred in Greater Vancouver and the surrounding areas.”
The other big question, of course, is whether working from home will remain a permanent fixture in Canadian society, or whether people will largely return to the office post-COVID.
"While the trade-offs for relocating seemed obviously worthwhile during the pandemic, will they remain so after?” Tal questioned.
"I believe that this trend is unsustainable,” he elaborated in an interview with BNN. "It will probably continue over the next few months … but let’s picture our lives a year from now, 10 years from now. A huge amount of labour will go back to the office. A lot of that would be in big cities and, all of a sudden, you find yourself that you have to commute maybe two or three times a week.”
And even for those who are able to work remotely almost exclusively at their current job, Tal says that’s not to say their next job will be so flexible.
In the end, only time will tell whether this current shift in home buying preferences will become a longer-term trend, or end up in history books as a short-lived fad brought on by the pandemic.