I have been a bit of a broken record lately, focused on making the point that the sky isn’t falling (in most sectors of the economy, anyway).
While there has been substantial disruption and a lot of temporary layoffs, the pandemic isn’t so much a new wildfire as an accelerant for ones that were already burning.
Just look at the housing market – a record-setting July as those who had planned to buy or sell in the spring, but decided to hit the pause button because of the pandemic, picked up where they had left off.
Other anecdotal indicators include CPP Investments posting “a broad rally after March low” and Minto Apartment REIT reporting that it is doing OK collecting its rents.
This is not to say the pandemic isn’t having an impact. No aspect of how we live, work or play has been unaffected.
From the perspective of a real estate developer with long planning horizons, many of these impacts are short-term.
Take, for example, the impact this fall on Ottawa’s rental market if out-of-town students opt to stay at home and rely on remote learning. Or the continued impact on buying behaviour and things like dining out as people remain cautious and housebound.
Impact often means change. The trick is to understand what form that change will take and to adjust accordingly.
The two different stories coming out of the housing market are a great example.
The first housing market story
I’ve written before about my two neighbours who each recently sold their homes for $200,000 and $300,000 over asking after bidding wars erupted in my old Ottawa neighbourhood of Westboro.
The middle-class home my wife and I purchased for what now seems a song in the mid-’80s is today a seven-figure property and its value continues to climb.
Meanwhile, developers continue to break ground and file site plan applications for projects along the current and future route of Ottawa’s LRT system. We see this optimism in Toronto, too, and other cities across the country.
Clearly, developers anticipate where they may be in two years or so, with mid- to higher-rise multiresidential developments very much in their futures.
But wait, there is the second story
Take a drive 20 or 40 minutes past Ottawa’s suburbs and realtors in communities with 6,000 to 12,000 residents are talking about how an exodus of people from the city is driving up housing demand and selling prices like never before.
“Due to COVID, it’s a real demand right now for people coming out of the city,” Century 21’s Stephanie Mols recently told CTV Ottawa. “They want to have the extra room in the smaller cities around the city and this is what, for example, Carleton Place and Perth is providing.”
It’s not just people from Ottawa.
“Like, 70 per cent of those enquiries are coming out of the (Greater Toronto Area),” Mols added, “which is, in my expression, they are fleeing out of the city.”
Indeed, and yet the Toronto housing market continues to boom.
So does Ottawa. For each homebuyer eager to flee the city, there is another eager to max out their budget to buy into a central urban neighbourhood like mine.
All of which proves the same old factors that have always driven the housing market continue to do so – people buy to their tastes to the extent their income allows. And of course, our tastes change over time.
Taking advantage of circumstance
Some people are getting the hell out of Dodge because, likely, they have long wanted to. Maybe their decision to act now has to do with health and safety.
Or, maybe months of working from home has proven to them and their employer they don’t have to keep living in the city just for a shorter commute. They can escape the commute altogether and do their job just fine from where they really want to live . . . provided they have high-speed internet.
Another factor that may be at play is the prospect of working from home long-term has made homebuyers realize they need more space for that dedicated home office, because working from the dining room table is only viable for a couple of weeks.
If it’s a two-income household, maybe there is a need is for two home offices. If both the dining room and kitchen tables are taken up with work, there will be difficulties.
In this case, people may be heading out to a smaller community where they can get more property and a larger home for less money.
Why not move out to a picturesque town like Perth where housing costs are lower, more property can be had for the dollar and the great outdoors can be enjoyed?
A colleague of mine has a four-bedroom home on over an acre of property near Perth that he purchased for $325,000 three years ago. In my neighbourhood, a plot of land that size would likely be 10 to 20 times that price.
A kick in the pants
From a development perspective, the key is to understand how people’s tastes and priorities have changed and gear new housing development to the new realities.
A recent article here on RENX.ca about Groupe Heafey is a perfect example, as that developer focuses on providing buyers with a “choice of lifestyle rather than finish” in terms of how their homes are fitted up for things like a home office or home gym.
It’s a response to the fact that people will be spending more time at home.
Is some of the activity we are seeing in housing markets across the country pandemic-inspired panic buying? Undoubtedly.
But for the most part, I would say the pandemic has given people a kick in the pants to get on with dreams or aspirations they’ve always had.
To discuss this or any valuation topic in the context of your property, please contact me at [email protected]. I am always interested in your feedback and suggestions for future articles.