July 23, 2020 | Head Faking

Sales of detached houses in Toronto fell double-digits last month. But deals for properties in the burbs – even the faraway ones – rose by just as much. Toronto condo listings are growing like mushrooms in the humidity, Rents and prices are under pressure. Meanwhile in Muskoka and the Kawartha locals say the market’s on fire. In Vancouver the month/month price drop for a foot of condo space was the most in years, at thirty-four bucks. In Halifax, where new listings sell in hours, there are bidding wars. In BC, the Fraser Valley is steamy with aroused buyers and vaulting sales.

Whoa. Whazzup?

It’s Covid, of course. The impact of this virus is everywhere these days, now having a profound impact on real estate preferences. Says a headline this week in The Examiner (where I used to be City Editor decades ago when pages were made out of lead): “Hipsters who want to get away from big city fueling Peterborough housing boom.”

Why are housing tastes changing? It was not so long ago that a detached in 416 was the gold standard, that people would kill and maim to own in Kits and condos everywhere were hot properties.

Well, first, germs and space. Masks, social distancing and fear. Condo life is pure stress for many people who’ve been convinced living a few inches or feet from others is life-threatening. Elevators, mail rooms, corridors, door handles, garbage chutes – the potential virus transmission points seem everywhere.  Now that Covid has moved from offing octogenarians to disabling Millennials condos look like a seriously poor choice. So after a few years of ridiculous price inflation, the party’s over. Mix in the collapse of Airbnb and it’s a perfect storm.

Says Van housing analyst and bear Dane Eitel: “As the market progresses to feel the effects of the Covid-19 the mortgage deferrals will eventually come to an end. The tenants that haven’t paid will be asked to leave. Not to mention all the presold properties that will flood the market as the completions continue  – which is a whole beast on its own. The inventory has no choice but to skyrocket.”

Second, remote work. When your office closes, trying to stay employed while living with a kid and spouse in a two-bedroom apartment is the new definition of hell. And if you paid $2 million to have digs just a short train or tram or bike ride from your job – and the workplace shutters (maybe forever) – how dumb was that? Suddenly the sacrifices demanded by urban living seem extreme. Tight spaces. High costs. Congestion and compromise.

Third, budgets. Cash flow. The virus, Zoom and remote working has brought a new economic reality for millions of us. No commuting. No new suits. No heels. Maybe no daycare. Combine that cash with rent now being paid and you may well have enough for a house with some actual dirt in the boonies. Meanwhile mortgages have plunged to the 2% range for a five-year fixed, which means a couple of grand a month can now finance at least $450,000. So you can buy a 400-foot shoebox in the city or something like this, 110 km from DT Toronto:

Or look further afield. There are whole regions of the country where houses are affordable, services abundant and the geography stunning. If you can work from home in Collingwood or Hope, then you can do it in Nova Scotia, too. Like this house an hour east of Halifax on two acres (and it’s a B&B):

So while there’s sure been price inflation in the hinterland around major cities, affordability is dramatically better the further your drive. With this new Covid working-in-your-jammies reality and a strong Internet connection, distance is irrelevant. It allows real estate ownership without penury. You can actually consider having property and still feed your TFSA, chunk money into the kid’s RESP and make your group retirement plan contributions.

“All we have seen and heard in the past few months,” says a realtor in Peterborough (140 km from downtown Toronto), “are more people becoming keen on places like this that allow for a sense of community, a little safer, more space, walkable, with all those kind of things people have slowly been moving to over time.”

GTA realtor John Pasalis (who apparently hates me, but I forgive him) estimated the current boonie boom is focused on areas which average 86 km from the urban core.

Nor is this just a Canadian phenom. For months now there have been reports of a big move of folks out of NYC, Boston, Chicago and other places where life is tight, costs high and freedom curtailed. When there’s space, social distancing is a quaint notion. Masks are mostly unnecessary. Stress melts away for those whose minds have been forever bent by the fear of infection. The longer the pandemic dominates headlines and daily life, the more profound this shift will be. And how can this be a bad thing?

Thanks, Covid. After all the crap you’ve thrown into our lives, there had to be something of value. You owed us.

Garth Turner July 23rd, 2020

Posted In: The Greater Fool

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