This is one of the main points from an analysis recently released by the Bank of Canada, which looked at home appraisals in 15 cities across the country, both before the pandemic and now. Historically, downtown real estate tends to be more expensive because people want to live close to city services and amenities and livelier job markets. “But that pattern may have changed during the COVID-19 pandemic,” Louis Morel, a central bank policy adviser, said in a note released Monday. The cost and inconvenience of commuting is usually a disadvantage to living in the suburbs, but the mass movement to work from home during the pandemic overturned this old saying, as the residents of the center gathered en masse in the suburbs for more space. Morel notes that many of the center’s residents’ services to city life, such as concerts, restaurants, and live entertainment, have been shut down in one form or another. “Between working or studying at home and restrictions on public health, people were spending more time at home than ever before,” he said. “The desire for more living space may have encouraged many Canadians to seek real estate in the suburbs, where plots and homes are usually larger and more affordable.” Housing prices soared almost everywhere during the pandemic, but profits were particularly high in the suburbs, making them less affordable today than ever before. CLOCKS How do some suburbs deal with urban sprawl:
The Peel area of Ontario is struggling with urban sprawl
In the Peel area west of Toronto, officials have adopted a plan to expand urban development to accommodate a growing population, putting it in opposition to supporters who support the need to preserve green spaces. In 2016, a house in the suburbs 50 miles outside the city center would usually be worth about 33 percent less than a similar house in the city. Even in 2019, before the pandemic, this gap had shrunk to 26 percent, but according to the bank’s calculations, the average cost benefit had shrunk to just 10 percent last year. Desjardins economist Randall Bartlett briefly described the rise in suburban housing prices: “Drive until you meet the conditions.” “The increase in long-distance work during the pandemic has encouraged migration within and between provinces in an unprecedented way,” Bartlett said in a separate report last week. “Where families once left the city centers in search of more space as soon as the children arrived, they could now move much further, including rural communities and more affordable provinces.” But this trend may already be beginning to change, as many workplaces that previously embraced work from home have returned to a hybrid work model that will see most staff return to the office at least part of the time. The trend is already emerging in the housing market, as suburban markets that made huge profits during the pandemic are now seeing prices fall, even as large city centers remain largely stable. “It is difficult to imagine that the housing markets of some smaller communities will retain their unprecedented pandemic profits as people return to their personal work on a more regular basis,” Bartlett said. He says areas outside Toronto, some of which doubled average during the pandemic, are more vulnerable to slowing. “As we look forward to how the correction of the national housing market at the provincial level will evolve, in a way it is expected to be the opposite of what we saw during the pandemic.” While the Bank of Canada stops making guesses about the cause or making any predictions, it warns that reducing the price difference between suburbs and central cities could become a problem if preferences return to how things were. “If this shift in preferences is temporary, the proximity premium could return in part to pre-pandemic levels,” the bank said. “Such a shift in relative prices could be particularly problematic if housing supply in more suburban areas responded strongly in anticipation of continued local demand growth.”
