Analysis: Why London is losing its lustre for out-of-town homebuyers

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Up until very recently, London was among the most coveted destinations for families looking for a place to live.

Compared to communities closer to the Greater Toronto Area, the city offered a more affordable place to rent or own a home while still offering locals the comforts of big-city living.

And coupled with the work-from-home phenomenon brought about by the COVID-19 pandemic, London became a magnet for people of all ages, its population shooting up and becoming the fastest-growing city in the province, according to 2021 census data.

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Now, some of that shine seems to be rubbing off.

Though the city’s population has continued to grow – just this year the London area blew past the 600,000 population mark – a closer look at recent population data shows fewer people are coming from other parts of Ontario. The city is still attracting a large number of immigrants, but London has now also started to lose people to cities in other parts of the country.

The biggest factor behind the changing trend? London’s housing affordability crisis.

A recent study by real estate firm Royal LePage, for instance, showed a family making the 2022 provincial median household income of $84,400 would need to spend 49.9 per cent of that money to service the mortgage on a home selling for the region’s average price of $674,400. That’s assuming a 20 per cent downpayment on the property. Two hours down Highway 401, in Windsor, that rate was 36.4 per cent (the only major market in Southwestern Ontario to crack LePage’s top 15 affordable markets).

“That’s an absolute crisis situation,” said Mike Moffatt, an economist and assistant professor at Western University’s Ivey business school.

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“It’s very concerning, and it just shows a deep lack of affordability across Southwestern Ontario.”

After years of relative stability, home prices in London began to rise and accelerate around 2015.

The years that followed were marked by high appreciation of property value and area real estate agents setting new records for home sales almost on a monthly basis.

Compared to overheated markets in Toronto and Vancouver and surrounding communities, London was a bargain for buyers, especially those cashing out of those more expensive prices.

But as demand rose locally, so did prices. And the price difference between London and the GTA is not as attractive anymore.

Jeremy Odland, a broker with Royal LePage Triland Realty, said migration to London from the GTA generally tends to happen in waves, and it’s highly influenced by the state of the Toronto-area housing market.

Home sales in the wider Toronto area were down in June by 16 per cent compared to a year ago, while inventory has also increased in recent months.

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Remote work that led to many people leaving the Toronto core, has also led to more units available for rent and buy, improving affordability somewhat and making it easier for some people to stay there, Odland said.

“We used to be in a lot of people’s minds going back, you know, five or six years, and we’re now a little bit more competitive in terms of our pricing compared to the Toronto area,” he said.

“So, we do still have people moving down here both for rent and for purchase, but I think it will be a little bit slower than it was when we had the big boom that drove our prices up to where they are now.

“Even a city like Calgary with a booming economy right now, and a large major city, they’re still more affordable for rent and purchase over London, Ontario,” Odland added.

The numbers seem to suggest the same.

According to figures from Statistics Canada, London gained about 3,400 people who moved from other parts of Ontario between 2020 and 2021. The year after that, the net gain in intra-provincial migration went up to nearly 4,500. Between 2022 and 2023, the latest available data, that number dropped to about 3,175.

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But the largest drop is seen in the net number of people moving to other provinces from the city.

From 2016 to 2020, more people were moving into London from across Canada than moving out.

In 2021, however, the city saw a net loss of 108 people. In 2022, the net loss was 613 people. In 2023, that number shot up to 1,240.

Moffatt, the Western University professor, strongly believes affordability is a big factor in the changing trend.

“We are we’re more expensive than Edmonton. We’re more expensive than Halifax, and that makes it hard to attract the most mobile of workers, particularly those folks who have just graduated from university and college,” he said.

“So, I think that’s why we’re seeing that people are migrating further away to places they can afford and that’s showing up in home prices and home sales . . . and right now . . . folks in the GTA are more likely to move to Alberta these days and a little bit less likely to move to London.”

Deb Mountenay, interim executive director of the Elgin Middlesex Oxford Workforce Planning and Development Board, says housing affordability and the cost of living in a community are among the key factors employees look at when deciding whether to relocate because of a job.

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Even companies looking to attract and recruit workers are increasingly paying attention to the housing conditions, she said.

“It used to be that nobody really read about how your employees were getting housed, or where they’re getting housed. And now, there is more interest in what’s happening with the housing market,” Mountenay said.

“Pretty much every business that is currently looking for people is also keeping track of what’s happening in housing.”

Despite the recent trends, London’s population is expected to continue to grow in the decades to come.

The latest projections by Ontario’s Ministry of Finance say the population of the city alone could rise by 239,000 between now and 2046, reaching a total population of 685,000 by that year. To meet the projected demand, the city would need to build more than 100,000 new homes over the next 25 years.

Hitting those housing targets, Moffatt agrees, will be critical for the future of the local economy and attracting the needed talent to the region.

“If we build more housing, more and more people will come,” he said.

jjuha@postmedia.com

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