Months of lockdown has people yearning for more space. That, plus lofty city home prices and the work-from-home trend are driving a growing number of urban dwellers out of the city and into the burbs, and beyond.
June data from the Toronto Regional Real Estate Board (TRREB) shows a shift in housing demand from Toronto’s 416 area code to the more suburban 905 region.
Sales of detached homes in the 416 area were down 10% year-over-year, but up 10.5% in the 905. Similarly, semi-detached homes in the 416 were down 21%, but down just 2.2% in the 905, while townhouse sales rose 2.5% in the 416, but were up 7.8% in the 905.
“Last month, 67.5% of TRREB sales were in the ‘905’. That has ramped up from 65.4% in March,” Scott Ingram, a chartered accountant and sales representative with Century 21 Regal Realty, told Yahoo! Finance. “If the percentages don't sound high, based on last month's 8,701 transactions, it means 311 more people went ‘905’ than they would have at last year's rate.”
It’s a trend similarly playing out in other parts of Canada and the U.S. as well.
“In every urban geography, the web traffic of people and what they’re searching for has changed, versus six to 12 months ago, to be much more suburban,” said Ryan Schneider, CEO of Century 21 parent company, Realogy Holdings.
High Prices Adding to the Exodus
Renters are another demographic increasingly setting their sights further away from city centres.
For those waiting for a decline in prices to be able to enter the housing market, it’s starting to look like even a pandemic-induced recession might not be enough to reverse home prices—at least in big, growing cities.
Despite a small May pullback, many cities were back to posting double-digit annual price gains in June, including the Greater Toronto Area (+11.9%) and Ottawa (+17%).
What Can You Save?
This table below gives you a rough sense of how much money people are saving by purchasing a suburban home. It doesn’t factor in commuting costs or amenities, but for many who now commute less post-COVID, these may not be essential factors.
|Toronto (416 area code)||Down payment (20%)||Suburbs (905 area code)||Down payment (20%)||Price difference (vs. GTA)||Monthly Mortgage Savings *||Cottage Country **||Down payment (20%)||Price difference (vs. GTA)||Monthly mortgage savings *|
|Avg. detached home price||$1,523,770||$304,754||$1,027,634||$205,526||-$496,136||$1,708||$416,500||$83,300||-$1,107,270||$3,811|
|Avg. condo price||$672,465||$134,493||$528,028||$105,605||-$144,437||$498|
*Based on the lowest nationally available conventional 5yr fixed mortgage rate of 2.14% and a 25-year amortization.
**Source: Lakelands Association of Realtors. May 2020. Non-waterfront properties.
Sales Surge in Cottage Country Too
For many, the suburbs aren’t far enough. Many are driving straight past the suburbs and heading to cottage country.
Prices are even more favourable in some recreational markets. And private hideaways now have more appeal with crowded cities amplifying virus risk.
The Lakelands Association of Realtors, which serves the cottage country regions of Parry Sound, Muskoka, Haliburton and Orillia, reported a 7.3% year-over-year increase in non-waterfront prices in May (to a record $416,500), while waterfront properties were up 3.3% to $565,800.
“People are coming up in droves. They are buying everything,” Catharine Inniss, of Johnston and Daniel Rushbrooke Realty, told The Toronto Star. “COVID brought home that (people) wanted more space. Also, employers are embracing telecommuting much more now that they know it works just fine.”
Inniss, who is also president of the Lakelands Association of Realtors in Muskoka, noted that 278 cottages were sold in the District of Muskoka in June — a 73% increase from last year.
Clearly, comparing a Toronto detached home to a cottage is apples and oranges. But COVID has changed thinking for people who can work anywhere – or don’t need to work. For these folks, more and more are willing to trade their apples for oranges.