What the GM plant closure means for Oshawa’s economy and housing market
General Motors Canada has confirmed that it plans to close all assembly operations in Oshawa, Ont. after next year, leaving the community reeling with concern for the local economy and housing market.
And with good reason.
Auto manufacturing in the city of about 170,000 dates back as far as 1907, and the plant is still a major employer. It employs about 2,500 hourly and 400 salaried workers, with many more engineers working at GM’s adjacent Regional Engineering Centre.
Oshawa Mayor John Henry has said the closure would have ripple effects well beyond the city, hurting businesses and families throughout the Durham Region.
“From a personal finance perspective, this news is devastating for the people of Oshawa,” says Rubina Ahmed-Haq, personal finance expert. “Not only the ones whose jobs will be affected and have the obvious financial impact of losing a steady income. But, also those who depend on those workers to run their businesses – everything from restaurants to dry cleaners to places of interest around the area will be impacted. As well as property values, which are already much lower in Oshawa compared to other parts of the GTA, will take a further hit.”
Durham Region home prices
Illustrating Ahmed-Haq’s point, home prices in the Durham Region have already been feeling the pinch.
Historical average home prices, Durham Region
2018: $591,739 (as of October)
Source: Canadian Real Estate Association
Values continued to decrease during the third quarter of 2018, according to the latest Royal LePage House Price Survey. Over the three-month period, the aggregate home price in Oshawa and Ajax decreased 2.8 per cent and six per cent year-over-year to $538,757 and $664,640, respectively. Home values in Pickering also depreciated when compared to the same time last year by 4.4 per cent to $709,260, and the aggregate price in Whitby decreased 3.5 per cent to $677,243.
Oshawa median home prices
Standard two-storey homes
Q3 2018 $557,071
Q3 2017 $576,922
Q/Q % change 0.8
Yr/yr % change -3.4
Q3 2018 $512,001
Q3 2017 $517,237
Q/Q % change 2.3
Yr/yr % change -1.2
Q3 2018 $278,224
Q3 2017 $281,864
Q/Q % change 0.3
Yr/yr % change -1.3
Q3 2018 $538,757
Q3 2017 $554,070
Q/Q % change 1.2
Yr/yr % change -2.8
Source: Royal LePage National House Price Composite, October 2018
What we can expect in the housing market
“After an announcement such as this, we often witness an immediate softening of purchase demand in the city and its surrounds, while the shock and reality of the situation settles in,” Don R. Campbell, real estate expert and author told HOMES Publishing. “This slowdown doesn’t hit the stats immediately, as there are a lot of deals that are already in the process of closing in the next couple of months. However, come February, the numbers begin to reflect the new reality. That is phase one.
“Phase two is when average sale prices begin to fall, as confidence in the market begins to slip further. In other scenarios, it is just a sign of a move ‘down-market’ or to lower priced properties. However, in today’s world, the existing ‘stress-test’ will be combined with this lack of confidence to exacerbate the normal situation.”
A third phase may follow eight months to a year after the actual closure, when EI benefits begin to run to the end of their course, confidence in the potential return of the GM jobs begins to fade and families have to start making big decisions of relocation to find new appropriate jobs.
“In other words,” Campbell says, “the announcement of and the subsequent closing of the plant kicks off a predictable but sad ripple effect that will last for years.”
If there is one potential saving grace in this news, it’s that Oshawa and the surrounding area has a more diverse economy than in the past, which will help slightly buffer the pain, says Campbell.
“However, the pain is coming and it is real and far reaching.”
The Oshawa plant is not the only facility to be affected by GM’s decision to “accelerate its transformation for the future.” Two locations in the Detroit area are also scheduled to be shut down, which could have spillover affects in related industries across the border in the Windsor, Ont. area.