The Doughnut Effect

Wednesday Sep 23rd, 2020


Caution: This blog contains boring real estate-related stuff. There are no dogs (probably) and I won't be talking about my favourite local restaurants. It's about my observations over the last few months when it comes to peoples' buying habits.

We're still very much in a pandemic. Make no mistake - things are not back to normal. Back in April, people seemed to be in 'survival mode' and planning for the next month or so rather than planning for the next few years. Today, people are planning for the future when it comes to their family, their careers, their buying habits and their health.

I can relate. Where is my next paycheque coming from? If people aren't buying or selling houses, do I even have a future in this industry?

Pre-COVID, there was a huge demand for condos in downtown Toronto. People needed to live close to work, close to school, close to restaurants and bars, close to entertainment, close to major transportation hubs, close to everything. University students bought or rented condos near their schools, investors bought condos and rented them out on a short-term basis to travellers and this drove the prices up considerably over the last few years.

Take away the ability to travel, the ability to attend university classes in person, add in the ability for many people to work from and you've now decreased the demand for housing downtown. You've also increased the demand for homes which offer more living space, more working space and more outdoor space. Since people aren't necessarily making more money, they look in suburban areas that offer more value. 

Downtown condo prices slightly drop, suburban house prices begin to increase with the demand.

What about the people who are already living in the suburbs and commute downtown every day? Many people might no longer need to do this if they have the ability to work from home, and they begin to explore the smaller towns on the outskits of the big cities where they get even more value for money.

We've now created this 'doughnut' effect. (sorry, had to throw at least one food reference in!) The downtown core starts to open up, the suburbs fill up, the surrounding communities see an increase in demand as well.

What do you think? What have you experienced? Anyone agree? Should I stick to dogs and food blogs?








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