The new Canada: How COVID-19 pushed real estate buyers into the hinterland
Tristan Hopper
The Vancouver Sun
A promotional shot from Live for the Moment NB, a campaign by the Government of New Brunswick to lure remote workers to the province. Photo by Live for the Moment NB
It was last June when Haligonians started noticing something weird was happening. After weeks of hibernation, their real estate market had suddenly exploded into bidding wars, with some sellers reporting “30 or 40 offers on a single property.” At first, analysts brushed it off as “pent-up demand,” but then the prices just kept climbing — not just in Halifax, but across the Atlantic coast.
For years, Atlantic Canada has been a land of almost comically cheap real estate. Where Victorian mansions sold for less than a Toronto bachelor pad, and where historic churches in dying small towns could be picked up for $1. But after decades of losing people to Ontario, COVID-19 — and Atlantic Canada’s relative safety from the virus — was sending them all right back.
Charlottetown realtor Michael Poczynek summed up the view of his Ontario clients plotting a move to the Atlantic time zone: “We can’t get out of here fast enough.”
The PEI capital currently has an average housing price of $331,760. Photo by File
One of the most unexpected repercussions of the latter half of the COVID-19 pandemic has been an unmitigated explosion in coast-to-coast real estate prices. What’s more, there has been an unprecedented exodus of Canadian home-buyers to so-called “secondary markets”: The East Coast, the Okanagan, even the Yukon Territory. In a post-pandemic Canada that has seen workers untethered from the traditional centres of finance and industry, the country’s real estate future is increasingly lying with the likes of Barrie, Lethbridge and Charlottetown.
In RE/MAX’s most recent report on the state of the Canadian housing market, one area stood out above nearly all others: Muskoka, Ontario. In just one year, house prices in cottage country had jumped by a dizzying 20.3 per cent. For any Muskokaites who owned a $350,000 rancher at the beginning of 2020, each day of the COVID-19 pandemic saw their home jump in value by an average of $200.
Muskoka’s COVID-19 property rise dwarfs even the most ridiculous highs of Calgary in the grip of early 2000s oil fever. The cottage country surge is matched only by the most eye-watering days of Vancouver’s real estate surge. The West Coast metropolis needed avalanches of foreign cash to push up its real estate prices by an unprecedented 20.9 per cent in 2016. Muskoka, by contrast, did it when the borders are closed and the economy is in the toilet.
Muskoka: The extremely quaint face of one of Canada’s hottest real estate markets. Photo by Getty
While Muskoka is one of the most dramatic examples, all throughout Ontario it is clear that tourist towns, retirement communities and once-flagging industrial centres are seeing their real estate gobbled up at shocking rates. Collingwood, Ont., population 21,000, saw price rises of 19.5 per cent. Homes on the Niagara peninsula spiked by 19 per cent. Even Windsor, the capital of Ontario’s oft-embattled auto sector, saw house prices shoot up by 21 per cent in 2020 to an average of $406,000. This is a city where, only five years ago, the average house cost less than $175,000.
Typically, real estate prices in secondary Canadian markets retain at least a cursory link to economic realities. An Edmonton home rides the tide of an oil boom, while a Port Renfrew home feels the pinch of a forestry collapse. But this boom is striking almost everywhere at once — particularly in smaller cities. If you live anywhere that has the occasional cougar or bear sighting, the ground beneath your feet almost certainly ranks as one of the country’s fastest earning investments.
Interior British Columbia is still riding one of the greatest real estate price explosions in its history. “Buyers snapped up homes almost as soon as they were listed,” Association of Interior Realtors president Kim Heizmann said in a statement earlier this week. Just this week, Kelowna saw the listing of something that has never before existed in the non-Vancouver parts of B.C.: A $10 million condo penthouse.
A rendering of the $10 million penthouse at Kelowna’s One Water Street.
After years of darkness brought about by oil price collapses, cancelled pipelines and government austerity, Alberta saw real estate rise 7.5 per cent over the course of 2020, with some of the most dramatic movement in smaller centres. Cochrane, Alta., saw properties snapped up at their list prices after 500 days on the market. The small Alberta town of Coaldale just reported its first-ever million-dollar-home sale.
Even the North, usually insulated from the real estate travails of southern Canada, is seeing homes bid up by a wave of newcomers. In Whitehorse, Yukon, the average house gained $73,100 in value over 2020, an increase of 13.9 per cent over pre-pandemic levels.
None of this was supposed to be happening. It was only in May that the Canada Mortgage and Housing Corporation was forecasting nationwide real estate price dips of between nine and 18 per cent. Instead, 2021 is now expected to yield nationwide gains of five per cent.
RE/MAX, for its part, attributes the whole phenomenon to a trend of households “relocating to less-dense cities and neighbourhoods.” An Okanagan realtor interviewed by Global News speculated that in a world without travel or live entertainment, households were better able to stash away money for a down payment. The Brookfield Institute, a Toronto-based think-tank, has echoed the beliefs of many in a recent report pointing to a “rural boom” brought about by the popularization of remote work. Statistics Canada reports that an incredible 38 per cent of Canadian workers can plausibly work from home, representing untold millions whose only criteria for a home is whether it has an internet connection.
Collingwood, Ont., which saw real estate prices rise more than 19 per cent in 2020. Photo by Peter J. Thompson
The financial factor undergirding all this, of course, is Canada’s rock-bottom interest rates. “Interest rates have been dropping for 40 years, which means basically the only market that homebuyers have known is one where rates were lower every time they renewed their mortgage,” B.C. real estate analyst Leo Spalteholz told the National Post by email. COVID-19 has driven Canada’s cheap-debt binge into overdrive. The Bank of Canada announced this week it is holding rates steady at 0.25 per cent — the rate it has held throughout the entire pandemic.
Nevertheless, the data also shows that a seismic cultural shift is underway as Canadians flee the cities for lives in the country. Vancouver, Toronto and Montreal all saw record population losses under COVID-19 as residents filtered out into surrounding low-density municipalities. Statistics Canada chalked some of this up to “personal health” reasons as Canadians ditched “large urban centres hardest hit by the pandemic.”
Canada is essentially experiencing a micro version of what’s happened in pandemics throughout history. The Black Death in Europe spurred its own exodus to the countryside, most famously sending Isaac Newton into the rural isolation where he invented calculus. In the great smallpox outbreaks that battered Indigenous North America in the 18th and 19th centuries, groups in what is now B.C. abandoned sprawling coastal villages and moved to impromptu doomsday shelters on small islands or remote coves.
The effects on Canada’s 21st century urban centres won’t be nearly as dramatic, but within months of the first COVID-19 lockdowns, an entire generation that had planned to spend their days living in condos and riding the subway were suddenly buying cars and moving to the hinterlands.
The private car market, by the way, is undergoing its own curious renaissance. In September 2020, just as the rural boom began hitting its stride, Canadians bought $7.6 billion worth of automobiles, making it the 13th most car-buying month in Canadian history — not bad for a time when unemployment stood at nine per cent.
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