Realtor Daniel Foch, a house-slinger from north of Toronto, did some interesting plotting recently. He tracked 211 deals reported by the real estate board in the course of one day, following the links between the sale address and the agent’s office address, showing the path of buyer migration.
It’s an exodus, he says, from the urban core to the fringes. To the east Durham was a big winner. To the west, it was Mississauga. To the north, Caledon and Barrie. In all these areas since Covid came, sales and prices have romped higher. Just look at the latest stats – Toronto saw a 19% year/year gain in detached sales while the 905 hinterland bump was almost 40%. As for prices, 416 plumped by 11% while the increase was 18% in the burbs.
So this is what Foch came up with. The Tale of a Single Day of the Virus.
We all know why this has happened (and not just in the GTA – every major centre). The pandemic’s infected everyone’s brain, making folks think they need to see bovines and sunsets in order to stay safe. Urbanity is being forsaken. High-rise structures are shunned. The subway is basically empty. Nesting is the order of the day. Meanwhile the WFH phenom has changed real estate tastes dramatically. Folks want space for Zooming away from the rug rats. They want yards, front doors and garages. And they think they can live in far-off, exotic places like Scugog or Marmora because they’ll never have to commute again.
Foch understands, but believes this is folly: “The economics of living in Toronto have been not good for young people with really no opportunity to buy a condo. And now that prices are starting to decline, I’m getting tons of inquiries. I think a lot of younger millennials and Gen Z are actually going to be part of that resurrection of the urban area regardless of what happens.”
Well, this is interesting. For while I agree with his assessment, there’s a sea change happening in this segment of the market.
As mentioned here recently the dividing line is 500. Urban condos smaller than five hundred square feet are tough sells, with prices fading weekly. Larger units – especially those of a thousand feet or more – are still in demand. Prices steady or rising. And this is a problem, since over the past few years the industry has turned out tens of thousands of the micro-units, once eagerly snapped up by investors who leveraged small down payments into decent rents with annual capital appreciation. Many also shared in the Airbnb bonanza. But now, gone.
Compounding it all is a serious shortage of tenants as the virus wipes out urban jobs in the hospitality, sports, restaurant and entertainment businesses, while students stay home from uni and immigration crashes. Then there was that insane no-eviction phase the provincial government went through and the shutting-down of landlord/tenant tribunals. Investor hell.
The result? A huge and growing supply of one-bedder boxes, falling valuations and tons of stressed owners. If agent Foch is right (he is) and the city resurrects with a new flood of young buyers, the early adapters could do very well.
So, where does this leave WFH and all those gypsies dragging their families and their futures into the distant sticks?
Out on a limb, of course. And meanwhile the inevitable is being discussed – that people who eschew the office and live/work remotely from some outpost should not only be paid less to do so, but maybe be taxed as well. After all, they’re avoiding commuting, no longer spending as much on vehicles, gas, restaurants or office attire and maybe cutting back on child care expenses – as well as living in a cheaper place. For the same reason a corporation would pay less for an offshore worker in a country where living costs are low, so the compensation for a WFH employee now communing with cows may fall.
Additionally, says a report from economists at Deutsche Bank, choosing WFH is a privilege that should come with a cost. They propose a 5% tax on these folks (because they’re spending so much less in the real economy) with the money going to subsidize low-paid essential workers who do not have this luxury, and upon whom society depends. The employer would pay if it stopped providing work space for the employee, but if the office overhead remained and the worker seldom arrived, the Zoomer would be taxed daily.
Oh, and did I mention the toll roads into the city?