The migration of big-city homebuyers to smaller towns — and the resulting price growth in those markets — have been the big stories of the 2021 Southern Ontario real estate market.
But this is nothing new.
For years, GTA buyers have sought affordability in Kitchener-Waterloo, Cambridge, Guelph, Brantford, and smaller towns further west. We’ve been talking about it since 2016.
But, are these smaller towns as much of a bargain as they were five years ago? This is the big question as relative affordability is the catalyst for out-of-town demand and, as a result, continued price growth.
Here’s what the data is telling us:
Where we were five years ago:
This is where the benchmark prices (via MLS Home Price Index) for the Greater Toronto Area and areas to its west stood in August 2016:
|Market||Benchmark Price August 2016||GTA Price Gap||% Lower|
As you can see, GTA buyers stood to save between $187,000-$433,100 (28%-65%) on their home purchases by moving westward.
The big question: has that changed?
Five-Year Price Growth
Here’s how much prices have changed over the past five years in the markets we just mentioned:
|Market||5-Year Price Increase|
When looking at percentage price growth, you’d think that the price gap between the GTA and other markets must have tightened. The following graph, however, tells a much different story:
If you were to measure the gaps between each market and the GTA on each side of this chart, you’d find that they are pretty much the same. In other words, home values have increased in unison.
In fact, when you look at the price increases in each market, they’re all within a $60,000 range despite dramatically different starting points:
|Market||Benchmark Price August 2016||Benchmark Price July 2021||Increase|
As a result, the price gap has not tightened significantly. In some markets, it’s actually widened:
|Market||GTA Price Gap August 2016||GTA Price Gap July 2021||GTA Price Gap Increase (or Decrease)|
Simply put: the average Kitchener-Waterloo-Cambridge home is 300k cheaper than a GTA home – just as it was five years ago. Brantford, Woodstock, and London homes are even more of a relative bargain.
Is there room for price growth?
While overall affordability has been reduced, which is understandably frustrating for many homebuyers, relative affordability is virtually unchanged.
As a result, as long as the appetite for homeownership persists — and absent a huge uptick in new home construction to balance supply and demand — prices will likely continue to rise in smaller markets where homes are more affordable and the ROI (as a percentage) is higher.
Knowing the five-year history, where we stand today, and the projected trends, it’s important for buyers to seek expert advice, stay informed, and be open to high-growth opportunities in markets across Southwestern Ontario.
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