Canadian Cities Will Bounce Back From the “Exodus” To Suburbs

Written by Posted On Tuesday, 16 March 2021 00:00

From July 2019 to July 2020, more than 80,000 people moved out of Toronto, Vancouver and Montreal to outlying communities in their provinces. That’s the largest outflow in 15 years and that time-frame only covers the first five months of the pandemic.

“Moving away from the city to buy a bigger home has been the trend for years,” says a report by Benjamin Tal and Royce Mendes at CIBC Economics. “However, the pace has clearly accelerated during the pandemic.”

The demand for affordable single-family homes has sent prices soaring in the suburbs and small towns outside of the big cities. While prices for detached homes also grew in the cities, condominium prices and apartment rental rates were flat or dropped.

“The biggest driver of net outflows is consistently the 25 to 45 age group, which is typical of growing families (and contrary to what you might have been told, families don’t usually want to raise kids in dense condo developments),” says Robert Kavcic, senior economist with BMO Economics. He says that age cohort is growing, which has also accelerated the trend.

“So, the pandemic has prodded some temporary movement out of the major cities; while it also likely pulled forward some movement that was eventually going to take place anyway in the years ahead. As such, the observed ‘exodus’ from the cities might be somewhat exaggerated at the moment,” says Kavcic.

A survey by Ratesdotca found that 51 per cent of the people who moved in 2020 due to COVID-19 said they did so to “live in an area with more nature”, while 36 per cent said they “felt financial pressure” to find a cheaper home. Tal and Mendes say the idea of moving out of the city to an area where you can afford your dream home made perfect sense during the pandemic.

But prices in the suburbs and small cities have gone up so quickly “that they risk reaching a resistance level, in which the premium paid to live in a big city has narrowed enough to trigger second thoughts about moving.”

The other big factor is the ability to work from home. Statistics Canada reported that 40 per cent of Canadians worked at home during the pandemic. 

“Remote work is here to stay, but so too is the office,” says a report by CBRE Research. “The mass shift to remote working during the pandemic has put a spotlight on a trend that has been growing and is not new: fluidity in work styles. Most employees want to work in a more balanced way and as they return to the office, they will desire flexibility and choice. Employers seeking to come out ahead in the race for talent will need to build trust and offer choice.”

But a report by JLL says office-using companies have been getting by with some remote workers, “however they are increasingly concerned about issues relating to mental health, onboarding and sustaining culture. A JLL survey of Fortune 500 office-using companies reveals that they are looking to have at least 80 per cent of their workforce back in the office by the end of 2021.”

Tal and Mendes say that while the trade-offs for relocating “seemed obviously worthwhile during the pandemic, “the reality is that despite the wave of companies announcing permanent work-from-home policies, much of the post-pandemic world might revert back to operating like the pre-pandemic one. A survey by Statistics Canada taken in the third quarter of last year suggests that many employers of workers currently doing their jobs solely from home expect them to go back into the office full-time after the pandemic is in the rear-view mirror. Not two days a week. Not three days a week. Full time,” say Tal and Mendes.

They warn that “making decisions based solely on current working conditions could be a mistake for many. Employers have to take into account a whole host of issues, including but not limited to training new workers, privacy and security of information and collaboration, which make having employees work from a central office more attractive despite technological advancements.

“Even if those moving to more remote locations guess right, and they’re actually able to do all their work from home post-COVID, there’s still a catch,” say Tal and Mendes. “Other employers might not be so flexible. So moving out of the city might limit future job opportunities.”

Kavcic says that “a year of lockdowns and travel restrictions have incented an explosion in demand for recreational property and real estate typically outside normal commuting distance.” 

Although demand for these properties is likely to ease following the pandemic, “even if we return to an environment where time is split between home and office, ownership of a second property is no longer just a Friday evening-to-Sunday afternoon proposition. As a result, some of the increase in prices will likely stick.”

Kavcic adds: “Canada’s major cities are in the midst of a generational challenge, but they are likely to come back steadily as immunity broadens. Some of what we’ve seen through the pandemic represents the pulling forward of shifts that were going to happen anyway, like the demand for single-family homes. Some of it, like remote work, hints at long-term adjustments that will reshape, but not completely alter, the work environment…. The big cities will ultimately remain engines of the Canadian economy.”

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Jim Adair

Jim Adair has been writing about Canadian real estate, home building and renovation issues for more than 40 years. He is the former editor of Canada’s leading trade magazine for real estate professionals, as well as several home building, décor and renovation titles. You can contact him at [email protected]

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