COVID-19 caused an inadvertent housing boom in remote Canadian cities hours from urban centres, but a report from CIBC Capital Markets speculates that could come to a screeching halt once the pandemic ends.

“The reality is that despite the wave of companies announcing permanent work-from-home policies, much of the post-pandemic world might revert back to operating like the pre-pandemic one,” said the report from Capital Markets’ economists Benjamin Tal and Royce Mendes. “A survey by Statistics Canada taken in the third quarter of last year suggests that many employers of workers currently doing their jobs solely from their homes expect them to go back into the office full time after the pandemic is in the rearview mirror. Not two days a week. Not three days a week. Full time.”

The pandemic was the impetus for the Bank of Canada plunging interest rates, which made passing the mortgage stress test easier, but with a very finite supply of single-family detached homes, prices have surged. No longer bound to metropolitan areas simply so they could commute their city jobs with relative ease, Canadians have taken full advantage of work-from-home policies and moved as far as cottage country, spurring significant growth in small market home prices.

“On average, beyond the first 50 km, every 10 km drive further away from the city will buy you an extra $25,000 of house,” said the report. “Of course that’s nothing new. Moving away from the city to buy a bigger home has been the trend for years. However, the pace has clearly accelerated during the pandemic.”

But that rapid price acceleration risks colliding with “a resistance level,” which would bridge the price gap between housing in these growing, far-flung centres and big cities. The report says that remote centres 50-300 km away from Toronto comprised 5% of total sales, a fairly trifling share, and that prices reaching a resistance level could stymie further growth. In Vancouver, that may have already happened.

“The premium paid had been narrowing until 2017, but since then, home price inflation in Vancouver has outpaced that seen in more remote centres,” said the report. “Given that Toronto traditionally lags Vancouver when it comes to housing trends, it’s not surprising to see that Toronto is now where Vancouver was pre-2017.”

The report doubts that, post-pandemic, employers will be as amendable to remote working arrangements as they are now, especially because COVID-19 forced their hand, and questions the wisdom in moving to towns and cities hours away from one’s physical workplace. In short, the pandemic is ephemeral and employers expect employees to come back to work. And while some employers might grant current workers the flexibility, future employers most likely won’t.

“So moving out of the city might limit future job opportunities. For the highest earners, purchasing a condo in the city to stay at during the workweek, as seen in other high-priced cities like London and New York, might be an option to insure against a potential return to the office or future employment mobility. But now might be a good time to make that investment.”