The city of Thunder Bay. Photo: Riaz Mehmood/Flickr
Some experts suggest Toronto’s housing bubble has fanned out as far as Thunder Bay, or roughly 1,400 kilometres away.
The city, known as Canada’s Gateway to the West for its proximity to the Manitoba border, is seldom mentioned in economic commentary by one of Canada’s biggest banks.
But gargantuan gains in home prices in smaller outlying Ontario markets including Thunder Bay, which is simply too far from Toronto for daily commutes, are on the radar of the Bank of Montreal’s economics branch.
“Almost the entire province of Ontario’s housing market is now on fire, while most of the rest of the country wonders what all the fuss is about,” says Porter, in a response to the latest Canadian Real Estate Association (CREA) report.
CREA figures show the median price of a Thunder Bay home during this year’s first quarter was $218,000 — a steal compared to the Toronto median of $765,000 for March. But it still represents an eye-popping increase of 21.2 per cent over the year before.
Price growth in the detached corner of the market was even more dramatic over that period, with the segment achieving a median price of $235,000, up 31.3 per cent from the year before as 353 of these properties changed hands.
Porter’s colleague senior economist Robert Kavcic tells BuzzBuzzNews the rise in prices in the city “suggests nothing more than a housing bubble spreading through Ontario. Thunder Bay, London, Orillia — take your pick.”
Kavcic did not speculate as to what, exactly, has caused the bubble to impact a market that’s a 15-hour drive from Toronto.
Mario Tolega, who owns a RE/MAX franchise in Thunder Bay, says two main demographics are driving activity there, and he agrees with Kavcic that a Toronto bubble is having an effect on this market in northwestern Ontario.
People who aren’t tethered to Toronto for work are considering Thunder Bay, population about 100,000 strong, for its affordable homes. “What we’re seeing is first-time homebuyers and retirees,” says Tolega.
Retiring baby boomers can cash out of their high-priced Toronto homes, buy one in Thunder Bay for a fraction of the cost, and spend half the year in Florida, he suggests.
Telecommuting, or otherwise flexible jobs that allow employees to work from home, makes it possible for younger working-age house shoppers to benefit from the much cheaper Thunder Bay market as well, he notes.
Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC), has not seen high prices in Toronto spilling over into Thunder Bay. Although it has flagged the phenomenon in increasingly far-away markets, including Sudbury and Ottawa.
In fact, Jean Sebastien Michel, CMHC analyst for northern Ontario, tells BuzzBuzzNews CMHC didn’t find any evidence of prices spilling over from the GTA to Thunder Bay in 35 years. “However, the present is not always a reflection the past,” Michel adds.
He provides some explanation for the strong year-over-year price appreciation recorded this year around Thunder Bay.
“An increase in the number of sales at prices above $200k coupled with a decline in the number of sales at prices below $200k are driving this large price increase,” says Michel.
“Inventory in the first quarter was lower than average, and may have pushed sale prices up,” he adds.
Diane Erickson, president of the Thunder Bay Real Estate Board, suggests Thunder Bay is not in bubble trouble. “Supply and demand is not an issue here. So, we don’t have a bubble,” she says, noting low interest rates have encouraged some activity.
“We’re at a way-more balanced market than we have been in the last five years,” the veteran agent adds.
Erickson also points out that CREA’s statistics for Thunday Bay cover a much larger area than the city itself. For instance, the numbers included track Kenora, rural Thunder Bay, and even Sioux Lookout, a four-plus hour commute by car.
If Thunder Bay is showing signs of a bubble, it would only be very recently.
Michel, the CMHC analyst, says growth in Thunder Bay has even been dragged downwards in recent years. “The annual price growth has slowed in each year between 2011 and 2016.”