After a spring that seemed to drag on for too long, summer arrived fast and furious. Following months of strict lockdown measures and a laundry list of public health guidelines that put Canada’s economy on pause, the public’s patience is paying off as the tide begins to turn in the province and across the country. Now that things are beginning to reopen and resume activity, has the real estate recovery begun as well? The numbers are certainly looking favourable in the Ottawa real estate market.
The nation’s capital was one of many housing markets that saw a temporary plunge in activity, with home sales cratering as much as 60 per cent in April, but the keyword is temporary.
The latest data suggest a huge rebound in almost every facet of this local market, from listings to resales to mortgage payments. Will summer continue to be a seller’s market as anticipated before the crisis? Slap on some sunscreen and let’s take a peek at the red-hot Ottawa housing market.
Summer in the Ottawa Real Estate Market
Our worst fears about the impact of the public health crisis upon the real estate industry have yet to be seen. Some may suggest that this is due to the commendable work of Realtors nation-wide, who continued to work during the pandemic and swiftly adapted to changing conditions (admittedly we, at RE/MAX, are a little biased). Whatever the case may be, the COVID-19 shock did not result in a perpetual collapse in the Ottawa real estate market – or even within other major Canadian markets.
Although industry experts have been cautious in their predictions on how the virus outbreak has and will continue to impact home-buying and selling, the pandemic appears to have only put a temporary pause to Ottawa real estate activity. As early as May, the Ottawa Real Estate Board (OREB) reported that the average sale price of a residential-class property surged 11.2 per cent in May compared to the same time a year ago, to an average sale price of $548,140.
The average sale price of an Ottawa condo was $343,589, up 15.5 per cent at an annualized rate.
Analysts note that the renewed activity likely stems from the pent-up demand that existed before the shutdown. When you factor in Ottawa’s stable employment levels, as well as support from the federal government, the nation’s capital had been viewed as a stable investment throughout the chaos. There is no indication that things will change during the dog days of summer.
Does this suggest a strong summer or a resurgence in the fall? The immediate future is uncertain, warns the Canada Mortgage and Housing Corporation (CMHC) in a recent report.
“As the virus is overcome, cities will bounce back, but there is significant uncertainty with respect to the path and timing of the recovery,” said Aled ab Iorwerth, deputy chief economist at the CMHC, said in a June report on the housing market outlook in Canada’s largest cities. “Rapid elimination of the virus and a resurgence in global trade will clearly be of benefit while further waves of the virus will put negative pressure on the economy.”
In addition to sales activity and prices, another factor impacting the real estate industry will be the remote work trend. In recent months, many professionals have been working from home, and a recent Angus Reid Institute study found that most Canadians working from home believe they will continue to do so, even after the pandemic is over. Real estate agents might be expected to accommodate this prevalent expectation, with home seekers adding “home office” to their must-have list.
Some experts are suggesting that employers may be requested to fund additional home office space or even partially pay for the cost of renovations. If the work-from-home practice remains embedded in society, real estate – in Ottawa and elsewhere – will need to accommodate this.
Showers in 2021 to Bring Flowers in 2022?
With talk of a possible second virus wave and various contrasting predictions for the nation’s recovery, there remains a great deal of uncertainty regarding the months ahead. What we do know is that borrowing costs are expected to remain at historical lows as the Bank of Canada (BoC) will keep interest rates at near-zero for the foreseeable future. Further, if social distancing guidelines continue and another lockdown is necessary in the future, the real estate industry has shown that it is ready to adapt at a moment’s notice.
Realtors have been quick to adjust to the new real estate landscape, leveraging technology and utilizing digital tools to service their clients. When they did have face-to-face meetings, strict measures were met to ensure public safety.
CMHC has prepared its early estimates for 2021 and 2022. Canada’s top mortgage insurer forecasted that the average price of residential MLS transactions in Ottawa would range between $406,000 and $460,000 next year. Furthermore, the housing agency said average prices would increase to between $415,000 and $490,000 in 2022. Put simply, a possible drop next year followed by a rebound in the following year.
It all boils down to this: even if Ottawa’s hot real estate market were to take a dip this year in the wake of a possible second wave, average home prices are likely to continue their steady increase on a long-term trajectory.