Home prices in some smaller, stagnating Canadian markets are getting higher from investments in the sprouting cannabis industry just six months after legalization, a new report suggests.
“The increase in employment activity and the success of cannabis companies are pushing agricultural land and house prices higher in tertiary markets,” reads a new report from Altus Group, a real estate data firm.
Tertiary markets are a step below major markets, like Toronto and Vancouver, and secondary markets, such as Ontario’s Kitchener–Waterloo and Guelph.
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Altus Group highlights two Ontario tertiary markets that benefit from the influence of cannabis: the municipality of Leamington and the town of Smiths Falls.
Researchers note that Leamington land values — which have been hurting since Heinz closed a ketchup factory in the town — have gotten a boost from pot growers Aphria Inc.
Meantime, Smith Falls real estate has reaped the rewards of Canopy Growth Corp, owner of the popular Tokyo Smoke brand, following its revitalization of a disused Hershey’s factory.
Both markets had been depressed after previous manufacturer departures, with unemployment rates rising.
But the arrival of cannabis-production facilities supports a rebound.
“They’re drawing employees from other areas,” Kruti Desai, manager, national research insights, data solutions at Altus Group, tells Livabl.
Desai notes that these companies require specialized roles to operate their high-tech growing facilities.
The arrival of cannabis companies also supports the local economy as it creates opportunities for other businesses to step in and offer services to the new facilities and employees.
Ultimately, housing demand created by the industry could spur homebuilding activity in relatively sleepy markets as well, but researchers note that not enough time has passed yet to see what the impact on residential construction will be.
“We’re still at the early stages. We’re seeing the sector evolve,” Ray Wong, vice president of data operations and solutions at Altus Group, tells Livabl.
Low land values and the availability of larger agricultural lots make these tertiary markets natural benefactors of growing industry investment, but there may be impacts in pricey major markets as well in a different segment.
“On the retail front, in some areas it could revive the neighbourhood where retail was struggling for years,” says Desai.
“I think in the six months we may see that change and that could impact some of the housing prices in those areas,” she continues.
But the effects of cannabis retailers on home prices are potentially double-edged.
One Zoocasa survey conducted just head of the October 2018 national legalization date suggests that 42 percent of Canadians say cannabis dispensaries are going to lower nearby home values.
“It could be a deterrent for some of the residents as well… that’s definitely an area we’re going to be tracking as well,” Desai says.