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People walk by the site of The Brix condos in Creemore, Ontario on May 3.Tannis Toohey/The Globe and Mail

Real estate developers are speeding up their expansion into smaller Ontario cities and semi-rural areas, signaling the next wave of investment in housing in a country struggling with a shortage of affordable places to live.

They are making inroads into vacation spots like Niagara, Wasaga Beach and Collingwood, as well as ramping up high-rise condo development in smaller cities like Hamilton, Guelph, Ancaster, St. Catharines and Waterloo.

Driving the push into these so-called secondary and tertiary markets are changes in how and where people work that were brought about by the pandemic’s stay-at-home mandates. More employees are allowed to do their jobs remotely, spurring demand for houses with room for home offices in the suburbs and beyond.

That has given developers an additional incentive to scoop up vacant land outside of major urban centers. The belief is that small towns will continue to grow in population, and demand will rise for all types of housing, including smaller and relatively cheaper types like condos.

Developers had already been buying in the suburbs with the knowledge that housing would be needed owing to high levels of immigration and investor demand.

Over the first two years of the pandemic, developers’ acquisitions of vacant land quintupled in Wasaga Beach; nearly tripled in Waterloo and Caledon; and doubled in Collingwood and Hamilton, according to Altus Group, a commercial real estate data firm. In Guelph and Niagara-on-the-Lake, the number of land purchases rose by 40 to 50 per cent over the same period.

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Work proceeds on the Monaco condominium development in Collingwood, Ontario on May 3.Tannis Toohey/The Globe and Mail

Suburban and rural land is fetching record prices, hitting an average of more than $2-million an acre in Waterloo last year. Niagara-on-the-Lake, Guelph and Brampton also neared that mark, according to Altus. The prices rivaled those found in Toronto and its neighboring city, Mississauga.

“There is just a scarcity of land for sale and high demand,” said Raymond Wong, vice-president of data operations at Altus, adding that land prices “really started accelerating” in the suburbs and semi-rural areas last year.

Land can be vacant or have unused structures on it or even be farmland with or without access to services like sewers and power. Although the country has an affordable housing crisis, these new developments are not designed to be affordable social housing. Members of the real estate industry and some economists have said additional supply will help create more affordable living options.

Mr. Wong said developers see real estate projects in the secondary and tertiary markets as their future, especially as the availability of land in the major urban centres has dried up. From 2020 to 2021, the number of land purchases declined in Toronto and Mississauga.

Bayfield Realty Advisors Inc., which has developed shopping plazas in remote Canadian cities since 2005, said it is scouring the country for new land. “We are looking in every province,” chief investment officer Bernard Ockrant said.

Bayfield recently shifted gears to include condo development, and is set to launch a six-storey, 116-unit condo building in Niagara Falls later this year. It is also getting ready to break ground on a rental-only apartment building with more than 300 units in Kingston. As well, Bayfield is embarking on several 30-storey condo buildings in Pickering, in what will be a massive, 25-year project in the eastern Toronto suburb.

Mr. Ockrant said the pandemic quickened the move toward the smaller cities, making it quite profitable to develop properties on land and redevelop shopping plazas that Bayfield already owned. That includes turning its unused land into residential real estate, as well as adding housing, storage and more retail to the shopping plazas. “The whole suite of possibilities has increased since the time we started in 2005,” he said.

Although the resale housing market has started to cool owing to higher borrowing costs, the preconstruction world is different. Preconstruction homes have yet to break ground or are under construction, and sales for these projects are often viewed as a bet on the future, because buyers wait years for their units. Developers typically require a down payment of 20 per cent over the first year, giving buyers more time to finalize their financing.

“They have two to five years to close,” said Cara Hirsch, founder of Hirsch + Associates, which helps real estate companies develop and sell their preconstruction condo buildings. “The fear-mongering of the increased interest rates hasn’t been affecting the preconstruction market like it has the resale market,” she said.

One of Ms. Hirsch’s condo projects in Creemore, just south of Georgian Bay, sold its second tranche of units in just a few days and at a higher price than the first round. The March sales averaged $783 per square foot. The first round, which launched last summer, averaged $665 per square foot.

“We couldn’t keep up with the demand. There is no other condominium offering in Creemore,” she said, adding that most of the buyers wanted a second property or an investment.

It has been a similar story for Elite Developments, another real estate developer that recently branched out into condo buildings. Its first condo project – a 10-storey building in Brantford – sold out in three weekends late last year. Elite spokeswoman Julia Pellizzari said 6,000 people had registered to buy one of their 198 condos.

Elite is getting ready to launch a 28-storey condo building in St. Catharines in what it said will be the city’s tallest residential building. It has other condo projects in the works in smaller cities such as Ancaster, Cayuga, Hagersville, Hamilton and Niagara.

Ms. Pellizzari said Elite is expecting to build a minimum of 1,200 housing units over the next couple of years, most of which are condos. Elite is also building some townhomes and detached houses. “We have a ton of projects coming,” she said.

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