Labrador West's housing bubble is deflating rapidly
Real estate market weakening following mine closures in Wabush and Bloom Lake, and layoffs at IOC
Available now for rent: a five-bedroom house in a quiet neighbourhood, near all amenities.
Monthly rental rate? $1,500.
How about a two-bedroom unit located in a recently renovated, three-storey apartment complex?
Your first month's rent is free, and the security deposit is reduced.
Monthly rental rate? $1,275.
If you look hard enough, you'll find better deals than that.
Where can you find lodgings at such reasonable prices?
How about Labrador West.
Yes, the same place where some senior citizens — most of whom were longtime residents — were forced to leave just a few years ago because the rents were too high and they couldn't afford to live there any longer.
Now they're in a position where they can't sell these assets and it's probably going to cause them trouble for the rest of their lives.- Jason Penney, president of United Steelworkers Local 6285
The same place the owners of that five-bedroom house were pocketing upwards of $5,000 per month just two years ago, and some homeowners were renting out their couches for $100 per night to workers flooding into the area.
And that two-bedroom apartment?
Renters could expect to pay $2,000-plus not long ago.
To put it bluntly, the real estate bubble that created such a frenzy in recent years in Labrador West, an area known as the iron ore capital of Canada, has officially burst.
Tammy Elliott, the owner of Big Land Realty, estimates the housing market has crashed by about 25 per cent in just the past few months.
"It's at an all-time low," she said, adding there are currently about 145 properties on the market in Labrador West.
Serious trouble with iron ore
It's not entirely surprising.
The news coming out of Labrador West in recent months has not been great.
The worldwide market for iron ore, much like oil, has been in freefall, plummeting more than 60 per cent in three years.
The Wabush mine, the cornerstone of the community for many years, closed in 2014, throwing more than 500 people out of work.
And the Iron Ore Company of Canada mine in Labrador City, which employs some 2,000 employees, also let go several dozen employees last year.
"The real estate market has taken a 180," said Jason Penney, president of United Steelworkers Local 6285, which represented the workers at Wabush mines.
"Two years ago it was a very difficult time to even find a house to purchase. Today, everywhere you look there seems to be a For Sale sign."
The region is being buffeted by what appears to a perfect storm, just two years after an economic boom that was the talk of the country, let alone the province of Newfoundland and Labrador.
Unemployed workers stuck with big mortgages
At the centre of the storm are the dozens of young workers who flocked to Labrador West over the past four years, eager to fill good paying jobs opening up as many older workers started retiring.
But there was a problem.
Many of those retiring workers decided to stay in Labrador West, close to their adult children and, in many cases, grandchildren.
This occurred at a time when Bloom Lake was coming online, an expansion was underway at IOC, and Wabush mines was in full swing.
The population swelled, and the housing market spun out of control.
Few could have predicted the the iron ore industry would stumble the way it has, and many newly unemployed mine workers in Labrador West are now stuck with mortgages that are far greater than the value of their homes, and dwindling job prospects.
"A lot of people got themselves in a bad way," said Jason Penney.
"It's one of the downfalls of living in a mining town. It's boom or bust. Right now we're in a bust."
Hopes for a brighter future in doubt
Long-term residents of Labrador West who purchased their homes many years ago can still walk away with a profit, but it's not the exit strategy that many had planned for, said Elliott.
"If they have to take a lot less, they are still winning," she said.
It's a different scenario for those who mortgaged a home in recent years.
"It's sad to see local residents struggle to pay their mortgages when their houses are worth less than what their mortgages owing is," she said.
Penney said many people came to Labrador West in recent years, hoping for a brighter future.
"There's a lot of people here who went and educated themselves, got trades, did whatever, came here to Lab West for a good job in the mining industry, trying to be responsible parents and family people. Now they're in a position where they can't sell these assets and it's probably going to cause them trouble for the rest of their lives."
With files from Jay Legere