National Post (National Edition)
COVID CLAUSTROPHOBIA HAS CREATED A RUSH TO THE SUBURBS.
SEARCH FOR SPACE, AFFORDABILITY CAUSING A DOMINO EFFECT ACROSS SOUTHERN ONTARIO REAL ESTATE
A flood of Toronto residents leaving their downtown condos in search of more space and greater affordability is causing a domino effect across southern Ontario real estate that is being felt as far away as Fort Erie, according to multiple brokers and agents in the province.
After COVID-19 reached Canada and made working from home the new norm for thousands, the first domino fell in Toronto's downtown core as swaths of residents left their condos behind in search of affordable homes with backyards and offices outside the city.
That led many to Hamilton — just close enough to Toronto to still feel within distance and just far enough to make buying a detached home affordable. The demand drove Hamilton's market into a frenzy and agents in the region say some residents there are taking advantage to cash in and move further west to the Niagara Region. The same phenomenon is occurring in turn in Niagara, with agents identifying Fort Erie as the destination of choice.
“It's this domino effect where people are moving further and further out,” said Conrad Zurini, a Hamilton-based broker of record at RE/MAX Escarpment Realty Inc. “It's this flight to affordability and greater value.”
In turn, Toronto's condo market is finally cooling off — something that appeared improbable at best in the beginning of the year. Sales of units in the second quarter were down more than 50 per cent from the same time last year, according to the Toronto Regional Real Estate Board. The number of pre-sale condos has slipped further, falling 85 per cent because investors who are usually responsible for gobbling up two-thirds of these units, are playing it safe.
The allure of those properties always came down to foregoing space in favour of being in the centre of the city where restaurants, concerts, bars, subway stations and yes, places of employment were a short walk away. But with offices shut down, concerts and sporting events not likely to return for months and restaurants and bars not yet feeling entirely safe, that deal is much less attractive.
Realizing that they'd be spending more time at home changed what those condo owners valued, Zurini said. And knowing they'll no longer need to fret about a twohour commute into the city has helped.
“This is what's happening: People are looking for more space,” he said. “A home has to be an office, maybe two offices, a classroom, a gym. These homes have become much more than they were before.”
Zurini said millennials make up the majority of those leaving Toronto for Hamilton. There, the average house price sat at $662,257 as of the end of the August, according to the Realtors Association of Hamilton-Burlington. The additional interest from Toronto has turned it into one of the hottest markets in Ontario.
Danielle Grant, a sales representative for the Hamilton-based Ambitious Realty
Advisors Inc. brokerage describes an environment where buyers must be willing bid between $50,000 to $100,000 above asking prices and forego inspections to have a shot at landing a house because of the intense competition.
On Monday, Grant said she was competing on behalf of a client for a house in the Hamilton Mountain region listed for $399,000 and there were a total of 22 offers placed on it. But it's the houses with fewer offers that are still selling for inflated prices that better describe the market. Recently, Grant and a client bid on a house that was on sale for $625,000 and despite only accumulating four offers, it sold for $761,000.
“It's incredible — $136,000 over asking price with only four offers is unheard of,” Grant said. “It used to be that each offer would go up by an increment of $5,000 and in my head, if there's 20 offers, it'll go $100,000 over asking price. I've never seen this with four offers.”
Like in Zurini's experience, Grant points at Toronto condo renters and owners, particularly millennials, for driving the price action. The latest statistics compiled by the Realtors Association of Hamilton-Burlington show just how much the market has changed in a year. Average house prices are up 21 per cent in the city and homes have stayed on the market for 7.7 fewer days. Zurini's own numbers point to 46 per cent of buyers coming from outside of Hamilton.
New listings are also up by nearly 12 per cent. And here's where the second domino falls: Hamilton residents, as a result of the higher prices, are also deciding to leave the city. Grant said Hamilton millennials are being priced out of their own city and now have to move to Welland and St. Catharines for affordable options. Zurini has had the opposite case. His clients, who are pre-retirees in their late 40s and early 50s, are taking advantage of the frenzy to upsize in the Niagara Region.
Zurini said a couple his firm recently handled sold a home in a suburb just outside of Hamilton for a price above $1 million and moved to St. Catharines, where they were able to upsize and get a pool, for just over $700,000. In similar situations, the equity earned is either banked or put toward early retirement for one-half of the couple, he said.
Niagara's market has also quietly been hot, according to Niagara-based Royal LePage sales representative Kelley Milan. According to the Niagara Association of Realtors, sales were up more than 37 per cent in August, while listings were up nearly 10 per cent. Likely as a result of the increased demand, the composite benchmark price for the region was up 15 per cent.
“I think it's actually crazier (than Hamilton),” Milan said. “I did not work from March to June. I came out of the gate in June and it was like list a house and two days later, sold.”
Michael St. Jean, the CEO of Michael St. Jean Realty Inc. brokerage, said he's been telling clients to be prepared to bid over listing prices for homes in the area as well, although not to the extent that they would need to in Hamilton. Not only is Niagara dealing with an influx of buyers from Hamilton, it's also drawing interest from Greater Toronto Area buyers who are skipping over Hamilton and setting their sights St. Catharines and Welland, he said.
With prices increasing there, the third domino is falling. St. Jean and Zurini have already seen the pattern developing where sellers in more urban areas of Niagara are moving to Fort Erie, Ont., which sits right on the Canada-U.S. border.
“You're going to have that same spillover where they're going to stay within a close distance to the big urban centre but they're going to spread out in hopes of finding land for better value,” St. Jean said.