The Ottawa housing market has been fascinating to monitor throughout the COVID-19 pandemic.
Experts say that the local economy is built for the ever-intensifying work-from-home trend, largely comprised of public sector workers and IT, which are perfect occupations for remote work. Premier Ford shut down the province, forcing many people to telecommute from their kitchens or bedrooms. With spouses and children also working and learning from home, more space became a chief requirement among modern housing must-haves.
Over the last couple of years, the Ottawa housing market has seen a flurry of activity. Many prospective homebuyers are looking to acquire more space to adapt to unique market conditions. High demand and ultra-low borrowing costs have triggered a tsunami of home-buying, which drained inventories across this local market. This has contributed to a market imbalance and sky-high prices.
It was a perfect storm for the Ottawa real estate market, resulting in record activity in 2021. But how did this local market end the year? Let’s explore the recent numbers to see how Ottawa closed out 2021, and what’s in store for 2022.
Supply Level in Ottawa’s Housing Market Hits a Critical Low
The Ottawa housing market saw a year-over-year 14-per-cent decline in residential property sales in December, new Ottawa Real Estate Board (OREB) data show.
According to OREB, 862 homes changed hands, down from 997 the same time a year ago. The decade-long average for this time of year is 809. Sales in both the freehold and condo categories slumped in December: the residential-property class tumbled 15 per cent, to 601 units, and the condominium-property class dropped 10 per cent.
On an annual basis, the total number of freehold and condo units sold in 2021 advanced seven per cent to 20,302.
But while sales activity slowed in December, price growth remained elevated. OREB figures show that the average sale price for a residential-class home surged at an annualized rate of 18 per cent to $709,980. A condo-class property jumped 12 per cent to just below $400,000.
Supply continues to be a major factor in the Ottawa housing market. New residential listings fell 58 per cent month-over-month to about 600. This is 15 per cent below the five-year average. The months of inventory slipped to less than one in December, OREB noted.
“As we have reiterated for the past few years, Ottawa’s housing inventory challenges have been and will continue to place an upward pressure on prices,” said Debra Wright Ottawa Real Estate Board’s 2021 President in a news release.
Meanwhile, Ottawa Real Estate Board’s new 2022 President Penny Torontow explained that the first quarter is typically slower, and the macro factors are challenging to anticipate moving forward.
” Buyers are fatigued, parents are focusing on remote learning, interest rate hikes are looming. I don’t expect we will see the first quarter increases as we did in 2021,” Torontow stated.
“We are unlikely to see the true outcome of these macro factors until the spring. Presumably, we will see more of the same with the market performing as well as it can with the current housing stock. Unfortunately for homebuyers, it will sustain itself as a seller’s market for quite some time until our inventory issues are remedied. Whether you are buying or selling a home right now, the experience and knowledge of a REALTOR® is essential in this current challenging market.”
The positive news is that new housing construction has increased in the Ottawa real estate market. According to Canada Mortgage and Housing Corporation (CMHC), housing starts climbed 27 per cent year-over-year to 1,386 in November. Year-to-date, housing starts rose 7.32 per cent to 9,856 compared to the first 11 months of 2020.
Overall, it was a record year for the Ottawa real estate market as home sales totalled $13 billion in 2021. But can the nation’s capital sustain this level of appreciation growth in 2022?
What Will 2022 Bring for Ottawa Real Estate?
Over the next several months, many factors are anticipated to impact the Ottawa housing market and the broader Canadian real estate market, whether it is the Omicron variant or the Bank of Canada (BoC) raising interest rates.
That being said, prices are still projected to rise in Ottawa, the RE/MAX 2022 Canadian Housing Market Outlook predicted. According to the report, the 2022 price for a home is expected to rise five per cent to $679,914,90. However, at the same time, the number of sales is expected to drop two per cent.
Despite the enormous growth in the Ottawa housing sector, industry observers assert that it is still an affordable option when comparing to larger cities in the province or the rest of the country, especially on the condominium front.