Real estate frenzy hits small cities in Ontario

When Stephanie Hunter and Braden Bonwick were searching for a house in the Niagara region, they were given a brief opportunity to view the properties and were advised to provide a cover letter and photo of themselves as they competed with dozens of buyers for homes that were selling for $100,000 over the asking price.

“It felt like we were playing a game of chance,” Ms. Hunter said. “You have 15 minutes to look at a place while a line of agents and their clients is forming outside the front door asking if you’re almost done. Then finding out the home you just had 15 minutes to look at had 65 viewings that day and all offers have to be in by 5 p.m. tomorrow.”

Welcome to the small city housing frenzy, where Toronto and Vancouver real estate tactics have become the norm. There are no home inspections and no conditional offers – and bids are routinely well over asking.

Since the pandemic began, buyers have sought more room for their home offices, entertainment and living. That has sent prices soaring and prompted recent warnings of real estate bubbles in areas well outside Toronto – not surburbs, but places that are 1.5 to two hours from downtown Toronto and have never experienced an overheated real estate market or at least one this hot. Niagara, Barrie, Tillsonburg, Woodstock, Ingersoll, Prince Edward County, Kawartha Lakes, Grey-Bruce Owen Sound and other smaller markets in Ontario have seen home prices climb more than 30 per cent.

“At first, everybody was excited because anybody looking to move up could sell their house and they made a pretty penny,” said Jim Diodati, the mayor of Niagara Falls. “Until they realized you make more money when you sell, [but] you are also going to pay more money when you buy.”

Now, smaller cities are increasingly grappling with the same problems created by skyrocketing real estate prices – unaffordability and housing inequity – that have plagued Toronto and Vancouver for decades.

“Appreciating real estate values show that you have a desirable market. On the other end, it is becoming unaffordable for people trying to enter the market,” said Mr. Diodati, who worries about housing for younger generations. “We are asking ourselves: Is this going to be an obstacle that they cannot get past? Are we committing our kids to renting for a long, long time?”

Barrie Mayor Jeff Lehman said his city is facing the same issues: “Not being able to afford housing – that is a problem in a number of places in Canada and it is a growing problem here.”

The benchmark price of a detached house in Barrie reached $721,000 in February. That was almost $100,000 more than three months ago and about $200,000 more than a year ago, according to Canadian Real Estate Association data. Three years ago, the price of a detached house in the city was less than $500,000; five years ago, it was less than $400,000.

Barrie, which is a 1.5-hour train ride from downtown Toronto, is also now one of the country’s priciest rental markets. The average monthly rent for a two-bedroom apartment was $1,393 last fall, according to the latest data from Canada Mortgage and Housing Corp. That puts Barrie fifth, behind Toronto, Vancouver, Ottawa and Victoria.

“I am definitely concerned about this. We had an affordable housing crisis before this happened,” Mr. Lehman said, adding that lower-income workers had to move farther out of the city even before the recent surge in real estate prices.

The same run-up in prices has happened elsewhere in the past few months. Detached houses in Kitchener-Waterloo, Burlington and Mississauga have gone up by a minimum of $100,000 over three months. In Milton and Oakville, prices are almost $200,000 more than they were in November.

The average price of a house in Hamilton, a commuter city that used to be considered affordable, is almost $800,000.

In Prince Edward County, a popular vacation area for Torontonians and Quebeckers, a local realtor says prices have become disconnected from reality. Treat Hull, who has sold properties in the county for almost a decade, said his region is in a real estate bubble. “I am really worried that we’re heading for a train wreck à la Toronto in 1990. I hope I am wrong,” he said.

Even places such as Owen Sound and Niagara Falls, which have had depressed prices for decades, have seen a flood of Toronto-region buyers looking for more room and access to nature. “A lot of people in big cities are reimagining their way of life,” said Owen Sound Mayor Ian Boddy, who agrees with the other mayors that higher prices are a double-edged sword.

That was the case for Ms. Hunter and Mr. Bonwick. After 17 years of living in Toronto, they were sick of renting small, gardenless spaces and tired of the expenses that accompany city living. The couple, in their late 30s, envisioned buying their first house in St. Catharines, where they both grew up.

“Braden and I imagined we’d move back and find the perfect starter home. How difficult can that be? Ha ha,” Ms. Hunter said. The longer they looked, the pricier homes got. They turned to Niagara Falls after being priced out of St. Catharines.

Ms. Hunter said the process was “frustrating, discouraging and upsetting.”

“You have to decide quickly if you both liked it and then try to figure out what kind of number you want to throw out there in hopes that they’ll pick you, while trying not to become house poor. Then you sit and wait, only to hear they went with an offer that came in $100,000 over asking,” she said.

The couple made offers on five properties and competed against 15 to 25 buyers each time. They finally found a house in Niagara Falls for less than $450,000 and said their offer with no conditions put them ahead of the pack.