Is Ottawa in a Real Estate Bubble?

Historically, the Ottawa real estate market has been pretty healthy with a good volume of sales happening even as the temperature approaches 0 degrees Celcius and days become shorter. The real estate market in Ottawa and for most regions of Ontario has been on fire ever since news was released around the world that a COVID vaccine had been created. This was certainly a sigh of relief for many that the worst may now be behind us. Many people lost family and friends to this global pandemic and many lost jobs and suffered financially. Lots of people re-evaluated how they use to go about their day to day and for many, this brought some changes. Some changed their careers, others ended or started new relationships and many who were spending lots of time at home considered relocating to a different home, condo, or apartment.

Buying, Selling to Re-Align Priorities

The need to find new space was one of the key drivers in people buying and selling this year. Sometimes people would choose larger Ottawa homes or condos to accommodate the new reality of working from home and sometimes just to have a bit more outdoor space to enjoy with loved ones. We saw many individuals selling their downtown condo, which even prior to the COVID pandemic may have already been slightly tight, to relocate to larger properties such as freehold or condo townhomes at times for a similar cost. Shopify was one of the first employers in May 2020 to publicly announce that their employees would work from home as much as possible even after the pandemic ends. Tobi Lütke, CEO of Shopify had announced "Shopify is a digital by default company" meaning the thousands of employees employed by the local tech company that had chosen to live in Ottawa and at times in close proximity to the downtown Ottawa Shopify HQ could relocate across the City and at times across the country. Many businesses located downtown were some of the most hit by this pandemic. We think about all of these small shops (flower shops, catering companies, dry cleaners, etc) operating below ground at larger Government office buildings in the downtown core their foot traffic was cut off once people were settling in in their home office.

What about Downtown Ottawa Condo?

In the downtown core of Ottawa, areas like Centre Town, Lower Town, and Sandy Hill saw an increase in condo inventory. This area had an inventory of 64 condos (less than 1 month of inventory) for sale in January 2020 (pre-COVID-19 pandemic) and as news of COVID-19 vaccines we're coming out inventory climbed to 106 (2 months of inventory) in May 2020. We hit a peak in October 2020 when inventory had climbed to 230 condo properties which were about 4 months of inventory and 101% more properties than a year earlier. If you were a condo buyer October was likely your best month to negotiate a good deal on a downtown condo. At the time of writing in October 2021 inventory now sits at 138 properties which translates into 3 months of inventory.

When it comes to the average price of condos in the Centre Town, Lower Town, and Sandy Hill we saw a dip starting in April 2020 as many people were listing their condos for sale on the MLS. Many tenants also gave notice to their landlord that they would be ending their lease moving out of their downtown condo rental. Because the inventory of available downtown rentals was increasing many Ottawa landlords saw the opportunity to sell their condo units. This can be seen in the graphic below where the orange box shows the slight decrease in the average sale price of condos.

The Ottawa downtown real estate condo market appears to have come back. In the Centre Town, Lower Town, and Sandy Hill neighbourhoods of Ottawa a residential condo sells in an average of 17 days compared to 37 days in December 2020. If you are thinking of selling your downtown condominium, now may be a good time. Every situation is different, every unit and every building is also different so it is best to research and analyze everyone's scenario separately. You can schedule a Phone Call or Zoom Call Call with me here. 

If you are looking to discuss your real estate goals with me please reach out by email or by phone 613-889-7732. 

Is Ottawa in a Sellers Market?

Although at this time things are looking good on the downtown condo front. Things may look a bit different in the coming weeks and months as the construction of new condominiums and rental buildings are being built in the downtown core of Ottawa. Ottawa condos are often bought by investors looking for a passive investment generating income from rent and benefiting from property price appreciation. Once new rental units come on the market this could potentially, for a period, cause rental rates to dip in the area at times making it less attractive for investors to become landlords. Of course, if Ottawa's population continues to increase through immigration or more students slowly coming back for in-class studies the dip may be short-lived. As new condos are built many investors who bought from the builder at the sales centre pre-construction may choose to sell their units if they could realize a profit or if a tenant cannot be found. This added inventory of downtown condos could also bring prices down slightly until inventory has been reduced. Only time will tell. If you bought a condo from a builder and are looking to sell it or just rent it out, my team can help! Book a Phone Call or Zoom Call to discuss your real estate needs.

Will Ottawa Housing Prices Go Down?

I would lie if I would be able to tell you with certainty where the Ottawa real estate market is going but I can provide you with my thoughts. There are several reasons why Ottawa housing prices have gone up in the past and many of these factors continue to drive the growth today. 

Demand is in my opinion one of the biggest drivers. Population growth is one of the main reasons behind the increase in demand for housing in our city. A recent study shows the population of Ottawa could increase to roughly $1.6M, a 57% increase over 2018. Another key factor that is pushing housing prices up is the historically low-interest rates that are being offered by banks. Many who already have real estate assets were able to refinance properties to purchase additional properties with favorable mortgage terms pushing Ottawa's real estate prices higher. The consensus is that homeownership across Ontario is getting unaffordable. In Ottawa, ownership costs are at 38.7% of the median household income. 

This means Ottawa needs to continue to build more housing as our City grows in population. It's projected Ottawa will need 195,000 new homes by 2046. The City of Ottawa recognizes the housing affordability issue in our City and has put out a 10 Year Housing and Homelessness Plan 2020-2030 which aims to create between 5,700-8,500 new affordable housing options. When I see these reports I foresee the demand for housing continuing for the foreseeable future which in turn will likely sustain prices at these levels.

This means every year for the next 25 years we need to built approximately 7,800 housing units to meet Ottawa's growing population. To put things in perspective in the Greater Ottawa Area, according to the Canadian Mortgage and Housing Corporation (CMHC) we saw a total of 6,845 housing units completed in 2018, 5,936 housing units completed in 2019 and 7,787 housing units completed in 2020. Ottawa needs to keep building at this paste to simply meet demand. If the projected population growth is accurate housing units will continue to see high demand and this should in theory hold prices up. 

Another major factor that will affect the price of housing in the City and for many cities in Canada is the shortage of labour and increase in constructions materials because of the COVID-19 pandemic. Those looking to build seem to have trouble finding trades or contractors to complete the work. Although some building materials such as wood has come back down from it's peak earlier this year some materials are still higher than usual which often translates to a higher price for the end user who is buying the new built.

Finally, inflation in Canada hit 4.4% in September which is an 18-year-high. This can be seen on a day to day from the prices at the grocery stores to prices at the pumps. Many signs seem to point towards continued price appreciation for Ottawa for the near term. Changes in Government policies such as quantitative easing interest rate hikes from the Bank of Canada could affect the Ottawa real estate market.

If you are looking to discuss your real estate goals with me please reach out by email or by phone 613-889-7732.