The end of the ’slurbs?’
High gas prices may have impact on suburban house prices
Garry Marr, Financial Post
The dream of a two-car garage in the suburbs may soon fade thanks to gasoline prices that have most people rethinking their driving habits.
That dream was never really mine. I’m living the urban nightmare of a one-car garage stuffed with junk and my car parked on a pad in front of my house.
But millions of others make that daily commute to the city from their 5,000-square-foot mini-mansions in the “slurbs,” deterred, at the moment, only by traffic and the time it takes to get home.
“I think prices are going to become a major issue,” says Benjamin Tal, senior economist with CIBC World Markets. “Gasoline prices are up and they continue to rise. This means transportation costs will start to rise.”
His bank is already researching how rising gas prices are impacting housing decisions in the United States, but Mr. Tal says the issue is just as relevant for Canada.
Almost overnight, North Americans have been spurning their gas-guzzling cars for compact vehicles. While nobody is suggesting people will start fleeing their surburban houses because of high fuel prices, Mr. Tal believes that when consumers are making their next home-buying decision, location - in relation to transit - will become even more important than it was before.
“In areas that are close to public transit, you will see house prices there outperforming areas that are not close to transportation,” says Mr. Tal. “People talk about the affordability of owning a house, but getting to work is also an issue of affordability.”
If you live in a rural area, where the only mode of transportation is the car, don’t plan on getting much capital growth on your home.
Mr. Tal says this is a Canada-wide issue.
He expects families will look to driving less. That might mean looking for a daycare near a subway stop or bus stop. “We call these transit-zone households,” says Mr. Tal.
Builders are already thirsting for development opportunities near public transit, says Brian Johnston, president of Monarch Corp.’s Canadian division.
“We are always on the lookout for infill housing projects,” Mr. Johnston says, adding developers will line up for infill opportunities in the city, which are usually near public transit.
“This is all self-evident. If there was a site for stacked townhouses near a Go station, I would be all over it,” says Mr. Johnston, referring to Ontario’s regional commuter train system.
He doesn’t see families shifting to condominiums because they are generally too small and the condo maintenance bills on larger units are too expensive. Condo fees are assessed on a per-square-foot basis. “I see for us, as a company, the future being stacked townhouses,” he says, talking about family housing in the city. “You get a concrete garage underneath and a four-storey wood frame construction. It’s efficient housing. You don’t get your own backyard, but a common area with other townhouse owners. Homeowners can expect to make some sacrifices.”
With transit to Canada’s suburbs spotty at best (especially when compared to Europe), the impact on prices has already been felt.
A study released this month found the average price of a standard two-storey home in urban areas across Canada had increased 129.2% over the past decade to $522,999. By comparison, a suburban home rose 110.1% during the same period, to $334,380.
“I think the gap will grow,” says Mr. Soper, president of Royal LePage. “As the price of gas rises, it will put a premium on an urban home.”
The shift back to the city has not yet happened in housing, according to Royal LePage. But their latest study was done prior to the latest spike in gas prices.
Still, he says, there is such a discrepancy between what a consumer can get for his money in the suburbs versus the city, that many would still prefer to hop into their gas-guzzling cars than give up their big backyards and garages.
“Some people will make the lifestyle choice to adjust other expenses in order to live in the style their family desires if they are the type of family that wants their space,” says Mr. Soper. “They are willing to pay the price.”
He should probably add that prices will continue to go up - not in the value of their home, but certainly in their gas bill.
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