Calvin and Diana Brydges recently hit a setback while trying to give away their house. The Aylmer, Ont., couple set up an unusual contest this past spring, inviting ordinary people to write essays (along with a $100 entry fee) on why they were most deserving of taking possession of the couple’s home. The goal for the Brydges: 3,000 letters and a tidy sum of $300,000 collected from entry fees.
Yet by the time of the contest’s deadline on Aug. 31, the couple had received only 2,192 essays.
Despite the setback, the couple, owners of a thrift store in Aylmer, are feeling optimistic and have decided to re-launch the contest on Oct. 1. Past participants have been given the option of staying in the running, or bowing out.
“I’m quite hopeful that it’s still going to be a go. I still think there’s going to be an influx of mail,” Diana said, still expecting to collect enough submissions shortly before the first contest wrapped up.
But the Brydges’ trouble in reaching their contest goal may not be all that surprising to some.
The real estate market in small-town Canada is changing. Younger Canadians are moving into cities for work and baby boomers — a generation mired in unprecedented personal debt levels and approaching retirement age — want cheaper housing while maintaining the same level of amenities they’ve grown used to.
That’s not all, though. With few immigrants heading to small-town Canada and economists believing that a Canadian housing market ‘correction‘ is inevitable, home buyers may be gearing up for a rush of sweetheart deals in small towns.
For the Brydges, who personally appraise their home value at $300,000 and tried to sell it through conventional means for a year and half before the contest, this is not welcome news.
"People are losing jobs and they’re not moving [as much]. There are houses for sale in the area, but a lot of people are buying fixer-uppers. Our house is not a fixer-upper,” Diana says.
“Real estate doesn’t help. Agents come in, they sign the papers and then we never hear from them again. I don’t find they do much for the $20,000-$30,000 they earn out of a sale.”
Yet one big question looms large over the affair: is their home actually worth $300,000? It is located in a town of slightly more than 7,000 people, almost 40 minutes away from the nearest big city of London, Ont.
The question isn’t entirely unreasonable: the Organisation for Economic Co-operation and Development (OECD) says Canada has one of the most overvalued housing markets in the world. In the Aylmer region alone, comparable three-bedroom homes are listed for sale on MLS for as low as $59,900, with many more in the $150,000 range. Among the higher-priced homes on the outskirts of the town, where houses have more land, a few daring owners are asking for $285,000-$320,000. But that amount would only pay for a much smaller property in a city, making mobility a challenge.
“[The Brydges] obviously didn’t have an easy time selling their house, so they were trying to do something creative,” says Melanie Reuter, director of research for The Real Estate Investment Network (REIN). “And even that’s not working. I guess that action is pretty indicative of what the market is [like in the area],”
Most homes in Aylmer are advertised for significantly less than the country’s average sales price, which the Canadian Real Estate Association pegged at $382,373 earlier this July.
Reuter explains that economy is the primary driver of real estate prices. For isolated small towns, jobs are often single industry-based and can vanish if the employer takes a hit. The real estate market in Quesnel, B.C., area population of about 25,000, was on fire until the mountain pine beetle destroyed the area’s forestry prospects.
There are a lot of small towns that don’t … want to grow, they want to stay small, they like that there are no services, amenities, that’s what they believe their constituents want.— Melanie Reuter, director of research for The Real Estate Investment Network
Unless communities are sustained by mammoth oil and gas industries, such as British Columbia’s Fort St. John or Dawson Creek, towns with one or two major employers won’t likely grow forever, Reuter says. And if those industries falter, the towns’ residents will age and the community’s tax base will be reduced. Without working younger families coming in, the towns will likely die or age into retirement communities.
“It’s not that it’s not sustainable, there’s just more of a risk [to purchase real estate in many small communities],” Reuter says, adding that REIN investment advisors prefer small towns such as Leduc, Alta., which is attached to a large city.
“The secret of real estate is that cheap doesn’t necessarily mean better,” she says.
What makes selling particularly problematic in isolated small towns isn’t necessarily a lack of overall market demand, but the fact that cities offer considerably more amenities and convenience than rural regions ever could. Rural homeowners who market to the ageing generation that’s used to getting instant conveniences can’t demand city rates.
“What the research is showing us with boomers [who might have been the prospective buyers in small towns], is that they want to be connected. They are retiring, but they are still healthy, they are young at heart and mind,” Reuter says, explaining that the new wave of retirees is settling near friends, airports and other amenities permitting active lifestyles. They won’t find that in small towns, and gone is the notion of the city dwellers migrating in search of the simpler retirement life in the country.
The irony is obvious: for people looking to buy homes in cities like Toronto, it’s most definitely a seller’s market with home prices reaching record highs and no end to the real estate boom in sight. Yet for people in rural regions looking to sell their homes, it’s a buyer’s market.
“There are a lot of small towns that don’t … want to grow, they want to stay small, they like that there are no services, amenities, that’s what they believe their constituents want,” Reuter says.
And, perhaps, the constituents of Aylmer indeed look for that. Aylmer is still growing, albeit at a crawl, having attracted sizable Mennonite and Amish communities. Diana Brydges, who’s lived in small towns all her life, loves the close-knit feel her town provides.
“Smaller towns to me are a lot safer, they are just more community-oriented,” she says, adding that her thrift store business has seen a significant increase as more tourists started visiting the town over the past two years.
But according to Reuter, to grow economies, small towns need more than just tourism. “It definitely comes down to an Economic Development Office [in town],” she says. Small communities need to cultivate a business-friendly environment: lowering business taxes, offering to waive redevelopment charges and otherwise actively hunting for large-scale employers that could move in. For example, Reuter says, a larger municipality of Maple Ridge, B.C., has placed billboards at airports, boasting of its business-friendly policies.
But would many towns go that far?
“I would say that finding dynamic people willing to grow a city is an exception to the rule,” Reuter says.
And for small town real estate, there are definitely warning signs ahead. Unless the jobs grow or boomers change their minds on the business of connectedness, property owners of Canada’s Aylmers may need to temper their expectations of how much they can get for their homes.