Canada’s red-hot real estate markets have been well-documented in recent months. From Toronto’s record-setting summer to Vancouver’s incredible $49.7 billion in home sales in the first nine months of 2020, it has been an extraordinary rebound for the national housing market overall. But the nation’s capitol is surprisingly holding its own among world-class cities and within the fiercely competitive broader Ontario housing market: Ottawa!
The temperatures in Ottawa may have cooled off, but the city’s booming real estate industry is still heating up months after the height of the COVID-19 pandemic. It might be counterintuitive, but Ottawa’s real estate market is doing better now than it was a year ago, when there was no coronavirus weighing upon the national economy and leaving close to two million people out of work.
Of course, the question on everybody’s mind remains, can Ottawa sustain this upward trajectory? To help answer this question, we’re combing through the numbers to examine the growth trends within this sizzling Ontario market:
Ottawa: The Hottest Ontario Housing Market Right Now
According to the Ottawa Real Estate Board (OREB), residential real estate sales soared 51 per cent in September from the same time a year ago to 2,329. This is above the five-year average for September of 1,602 – the average is calculated by the total dollar volume of all properties sold.
The average sale price for residential-class properties advanced 19 per cent year-over-year in September to $575,506. The average condominium sales price jumped 20 per cent from September 2019 to $360,550.
Ottawa Real Estate Board President Deb Burgoyne commented in a recent news release that the city’s housing market has gone through “its own distinct ebb and flow, defying traditional spring and autumn cycles.” This, she says, can make it hard to accurately forecast if Ottawa can maintain this momentum.
Do the fundamentals justify the increase in prices and sales activity?
“Of course, the fundamentals of supply and demand remain at play, and our inventory shortage will continue to put sellers in a position to capitalize on the current market. Additionally, the dynamics of purchasing behaviour is shifting as buyers become more tolerant of the condition of a property or its location, for example,” Burgoyne stated.
With a jump in new listings and strengthening demand expected between October and December of 2020, the industry is cautiously optimistic that Ottawa’s housing and condominium market will continue to rise in the fall.
Is the Ottawa Housing Market Overheating?
Many market observers have been discussing pent-up demand as one of the chief drivers of this historic and robust growth in the Ontario housing market and elsewhere across the country. But has this pent-up demand been exhausted? Moreover, is a market like Ottawa facing a threat of overheating?
According to a new report from the Canada Mortgage and Housing Corporation (CMHC), low mortgage rates and the high volume of sales compared to new listings could be fueling an overheating landscape in the future. For now, the CMHC says, Ottawa has not yet reached a problematic level, but it could down the road.
“Robust growth of the young adult population … and low mortgage rates kept overvaluation pressures at bay,” the CMHC said in its report. “With weaker income, and robust price growth, the potential for overvaluation has increased, particularly once COVID-19 financial supports are removed.”
The report did signal low vulnerability in the nation’s capital due to a lower risk of overbuilding as the number of completed and unsold dwelling units has trended lower. At the same time, the seasonally adjusted number of condos under construction did climb to a six-year high of 3,156 units in July. If the demand is unsustainable and vacancy rates jump, then there is a risk of overbuilding.
Ottawa Real Estate Market in 2021
As a raucous 2020 comes to an end, what will 2021 have in store for the Canadian real estate market and the broader economy? For a lot of markets, including Ottawa, the fundamentals could support additional growth: rising demand, falling inventory levels, and cheaper borrowing costs.
With the Bank of Canada (BoC) not expected to raise interest rates for a few years, it has never been a more affordable time to be a borrower. It also has brought the conventional five-year mortgage rate to below five per cent, and this is unlikely to increase anytime soon.
The national economy could come under pressure when federal coronavirus-related benefits expire. The stimulus and relief efforts by the federal and provincial governments cannot last forever, and this could weigh on the housing sector and the broader economy, which is something the CMHC has warned about. But, considering that the worst-case scenarios have largely been avoided so far, Canada could once again defy expectations and venture down a path of a better-than-expected recovery.