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A house in Hamilton.

The Globe's Real Estate Beat offers news and analysis on the Canadian housing market from real estate reporter Tara Perkins. Read more on The Globe's housing page and follow Tara on Twitter @TaraPerkins.

Hamilton, which has long been known for the smoke billowing from its steel mills, is gaining recognition as one of the hottest housing markets in the country.

Its economy appears to be picking up, its population is growing, and its homes remain affordable even though price growth has been significant. Adding to the momentum is anticipation of increased commuter train service to Toronto once a new station is completed in Hamilton.

"Along with Calgary, Hamilton's housing market is currently the tightest among the major markets as measured by the sales-to-listings ratio," Toronto-Dominion Bank economist Diana Petramala wrote in a recent research note.

She added that the city has been an up-and-coming market since 2009, and the fastest growing in Ontario. Existing home sales have been rising faster than those in Toronto. Prices have risen by about 8 per cent a year since 2010, bringing the price-to-income ratio to "a lofty" 4.8 per cent, which is the fourth highest in Canada after Vancouver, Toronto and Montreal, Ms. Petramala said.

The price of a standard two-storey house in Hamilton rose 5.4 per cent in the second quarter from a year earlier, according to Royal LePage.

Local Re/Max realtor Conrad Zurini notes that Hamilton has a wide variety of neighbourhoods and prices, from the $165,000 simple detached homes in the east end to million-dollar-plus houses in Ancaster.

About one in four buyers are people who were living in the Greater Toronto Area, he says. And part of the appeal is that you can generally get more home for your buck.

A growing number of Toronto residents are choosing condos over houses as the price of houses climbs, but in Hamilton people are still by and large looking for detached homes, Mr. Zurini says. "In Ancaster, the entry level for that is probably somewhere around $325,000 to $350,000, and in the east end it's $160,000 to $170,000," he says. "That's where we're seeing multiple offers, that's where we're seeing a lot of activity. People are just looking at being in a mature neighbourhood with a detached home."

"We're seeing people from the Toronto area say 'I'm going to bank a couple hundred thousand dollars and purchase something in Hamilton,' " he adds.

Ms. Petramala notes that the average price of a home is about $400,000 in Hamilton, versus $550,000 in Toronto, and the price advantage has grown over the years.

"The price differential will remain a draw for residents priced out of more expensive markets within the GTA, thus helping to keep a floor under demand," she wrote. "Even as home sales head moderately lower over the remainder of the 2014-15 forecast horizon, Hamilton is expected to be among the minority of major markets recording modest growth in both construction activity and home prices."

It remains to be seen whether Hamilton will evolve into more of a bedroom community for Toronto.

"GO Transit has provided rush-hour train service to and from Hamilton since 1967," said Metrolinx spokesperson Anne Marie Aikins. "We also provide bus service to Hamilton. But two-way all-day is something the community really is anxiously awaiting."

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