The increased demand for living spaces in safer and quieter communities has increased the prices of suburban homes in Canada.
According to a study conducted by the Bank of Canada, the need to work remotely during the pandemic drove many home buyers to consider homes outside city limits, particularly houses that offered an optimal amount of living space and areas that could be converted into home offices.
This shift in location coincides with the closure of numerous downtown service areas in the country’s towns and cities. Indeed, it can easily be said that the search for suburban homes weakened the proximity premium that once appealed to those looking for homes within a short distance of their workplaces.
Narrowing Down the Price Gap
One result of this shift to the suburbs is that the price gap between suburban and prime downtown residential areas has grown considerably smaller.
Back in 2016, the average Canadian suburban home cost 30% less than an apartment or semi-detached residence in the heart of a downtown urban district. Just three years later, the difference was down to 26%.
If the pandemic had not occurred, experts say that suburban homes would cost around 21% lower than comparable urban properties. However, the Bank study shows that today’s suburban residences are just 10% cheaper than those in city centers.
A Potential Shift Back
But with businesses reopening and many people opting for hybrid work schedules that would have them report to work twice a week and work from home the rest of the time, experts believe that suburban home prices may be driven back down.
Indeed, the Bank of Canada study notes that people may prefer to move back to town. For one thing, needing to report to work regularly entails being able to get to one’s workplace on time. Also, given how numerous service and leisure providers like specialty stores, fitness centers, restaurants, clinics, and salons are returning to business, people may want to return to areas where these are more readily available.
The real estate sector may even see a partial return of proximity premium values to figures posted before the pandemic.
However, the study ends with a caveat for potential home buyers. A sudden shift in relative prices may pose a problem, especially if the availability of suitable housing in the suburbs increases, given the strength of ongoing demand.