Pandemic-era restrictions drove many Canadians towards the larger, more affordable properties available in the suburbs
Prices in suburban markets grew faster than in downtown areas during the pandemic amid the remote working revolution fuelling a preference for larger homes, according to the Bank of Canada.
“The move to remote work in many sectors of the economy made living close to the office less advantageous. Many of the services that downtown residents typically enjoy – such as restaurants, salons and gyms – were closed at various times during the pandemic. And between working or studying from home and the public health restrictions, people were spending more time at home than ever before,” said Louis Morel, senior policy advisor at the BoC.
This drive towards greater living space might have pushed many Canadians to seek larger suburban properties, which remain more affordable as a whole, Morel said.
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Morel noted that during the pandemic, the gap between suburban and downtown home prices closed considerably.
“This faster narrowing of the price gap based on geographical location reflects a shift in preferences during the pandemic toward more living space. It may also reflect the necessity for some households, especially among first-time homebuyers, to move farther from downtown to afford a home in a time of record-high house prices,” he said.
Morel stressed that a better understanding of this trend could help “shed light on the risks that the housing market and the economy face as the pandemic fades.”
“On the one hand, if the increase in housing demand during the pandemic in suburban areas reflects a lasting preference shift, the reduction observed in the proximity premium could become permanent,” Morel said.
“On the other hand, if this preference shift is temporary, the proximity premium could return partly toward its pre-pandemic level. Such a shift in relative prices could be especially problematic if housing supply in more suburban areas were to respond strongly in anticipation of local demand continuing to increase.”
