WHAT HAPPENS NOW?
Ottawa’s real estate market was booming — and then the coronavirus pandemic hit
Notwithstanding the havoc wreaked by COVID-19 in the past month, Ottawa’s housing market has been so hot that it’s been difficult for anyone to keep up — not realtors, not builders, and certainly not buyers.
We’ve heard plenty about the chronically low inventory of resale homes and how that, combined with strong economic factors, has led to higher-than-usual price increases and bidding wars that have become commonplace.
What’s heard less, but is just as prevalent, is the similar demand for new homes that has increasingly led to hopeful buyers camping out for days to be first in line for precious few lots that are released, as well as builder development projects that are more often than not temporarily sold out.
For a market with a reputation of being steady as a rock and largely unaffected by the wild highs and lows typical of cities such as Toronto or Vancouver, the situation that’s developed here over the past few years is unprecedented. And for buyers trying to get into this hot market, the prospect has been daunting.
Throw in the upheaval that social or physical distancing has created in the wake of the COVID -19 pandemic and it can be hard to know what to do, where to turn or what comes next. With that in mind, we take a look at the recent past, the present and the potential future to sort it all out.
THE PAST: BEFORE COVID-19
Ottawa’s hot market began about three years ago. Deb Burgoyne, a realtor who is also president of the Ottawa Real Estate Board, pegs it at early March 2017, which also happened to be when she bought a home for herself.
“I think it actually started right about then,” she says. “We just didn’t know it was starting — and it has just persisted.”
The busy spring market in 2017 didn’t let up, fuelled by everything from a strong economy to low interest rates, she says. All combined, it led buyers to believe they’d better get into the market while they still could.
“The last two years for sure have been a feeding frenzy.”
Noah Vandenbeek began searching for his first home early last summer. Although he initially hoped to buy a resale single-family home, escalating prices meant he had to settle for a town house instead and, even then, he wasn’t sure it was going to happen.
“I was trying to get something and it almost got to the point where it was too expensive to even buy a townhouse,” he says. “It was very frustrating.”
By late fall he was finally successful in finding a home, but not before losing out on several others. And he had to go in with an offer $30,000 over the asking price that had no conditions, including waiving an inspection.
“It was definitely scary because you never know what’s behind the walls,” he says.
By 2019, Vandenbeek’s experience was becoming quite common, with frequent reports of bidding wars and homes selling in a day.
“I’m in my 16th year and we’ve never had a market like this,” says Burgoyne.
Many of the factors that influenced the resale market also fuelled the new-homes market, which similarly saw increases in sales, including a record 6,315 new home sales last year, well above the 10-year average of 4,729.
And as the inventory of available homes in the resale market dried up, frustrated buyers turned to the new-home option, creating shortages there as well.
“Ottawa’s new-home market (in 2019) was in a frenzy with extraordinary sales,” says Cheryl Rice, president of industry analyst PMA Brethour Realty Group. “At the start of 2020, the market was moving towards a similar trend.”
As recently as mid-March, even as physical distancing began affecting local businesses — including builders — hopeful buyers were camping out at sales centres to be among the lucky few to reserve a lot to be released days later.
Xiangtianyu Kong was first in line for a scant six townhomes that Cardel Homes was releasing at Blackstone on March 14. Having been warned that lineups were common, he began camping out four days before the lots were to be released.
Two days later, with the lineup now seven deep and the pandemic having been declared, Cardel sent the hopeful buyers home, reserving their spots.
“We’re lucky, actually,” Kong says. “Otherwise it should have been two more nights.”
A week earlier, Yves and Natasha Cardinal also lined up at Blackstone, this time for the release of a handful of single-family homes. They had considered resale, but Natasha wanted to avoid the “heartbreak after heartbreak” of losing out on a home.
“We have friends that have been looking for two years and have been doing bidding wars for two years, sometimes actually bidding $100,000 over asking and still being disappointed,” she says.
And that’s part of the attraction of a new build, says Yves. “You just have to camp out and have your down payment lined up. You don’t have to bid against other people; you just have to beat them to the front of the line.”
Even in locations where large blocks of lots were released, like Minto’s Arcadia release in Kanata in February or EQ Homes’ launch of Provence in Orléans last fall, buyers crowded sales centres trying to get a home.
For some builders, the answer was a first-come, first-served approach. Others opted for a lottery system or sold to just those on their registration lists.
“No matter how a builder tries to inject fairness or randomness into the opportunity to buy a home, the sheer demand means that someone’s going to walk away disappointed,” says Jason Burggraaf, executive director of the Greater Ottawa Home Builders’ Association (GOHBA).
And it has become increasingly common for project sites to be temporarily sold out as buyers snap up what few lots are available as soon as they are released.
Heading into March, just before builders had to severely restrict access to their sales centres, the GOHBA monthly report on the industry prepared by PMA Brethour Realty Group noted seven project developments that were temporarily sold out.
“The majority of homes that go on sale with builders have been selling pretty much right away as projects open,” says Burggraaf, who also notes that Ottawa’s population growth last year was 2.3 per cent, or 25,000 people. “That’s a huge demand.”
The solution is not simply to release more lots to meet demand.
“We have a shortage of trades across all industries in Ottawa,” he says. “So, you can sell a lot of homes, but then you’ve got to manage the time it actually takes to build those homes and engaging all the trades that it requires to do so.”
Adds Brent Strachan, who is division president of Minto Communities Ottawa: “There is a limit to how many more lots we can try to release to try to satisfy the demand, because of land supply and approvals, as well as our capacity — and our trades — to then build and service that number of homes and homeowners.”
Minto already builds 800 to 1,000 homes a year in Ottawa.
“The cadence and number of lots hasn’t changed,” he says. “The only difference now is how quickly the lots are being purchased. So, we then have several weeks or months with nothing, or very little, available until the next release.”
That was the situation until March. And then the pandemic hit Ottawa.
THE PRESENT: WHAT’S HAPPENING NOW?
What’s happening now seems to change daily, much as it is for the city and country in general.
By the last two weeks of March, builders had shuttered their model homes, then their sales centres, and scrambled to put measures in place to connect with buyers virtually.
“We’re looking for different ways to deliver the same information and I’ve been surprised at how much we’ve been able to accomplish,” noted Cardel vice-president of sales and marketing Tanya Buckley in the week after her sales offices closed.
It’s certainly not business as usual, but most are trying to continue to serve buyers and keep construction going with a minimum of disruption.
Video conferences, virtual walkthroughs of homes, electronic signatures, e-transfers and wire transfers — “we can convey the same information over a video conference as we can standing in front of you,” Buckley says. “What obviously can’t happen is the physical walk-through of a home right now.”
And with the province declaring residential construction an essential service on March 24, that means homes can continue to be built, although there have been rumblings from the Canadian Construction Association about the safety of workers on the job site.
In an update to its members on March 25, GOHBA, which represents the local housing industry, confirmed that despite the state of emergency that was declared that day in Ottawa, “planning applications, inspections and building permits will continue” — albeit with health and safety precautions in place — meaning construction would not be delayed by the city.
It’s a similar situation for realtors, who are prioritizing health and safety concerns for sellers and buyers while still trying to accommodate both where possible.
I was trying to get something and it almost got to the point where it was too expensive to even buy a townhouse. It was very frustrating.
THE FUTURE: WHAT’S NEXT?
That’s anyone’s guess.
In the week after COVID -19 was declared a pandemic on March 11, the real estate search portal Point2 Homes saw a declining interest in buying — during what should have been a ramping up of interest for the busy spring market — with online searches related to resale homes dropping as much as 32 per cent on March 16 alone.
And despite continued low interest rates that are unlikely to rise, even in stable Ottawa past experience suggests it is likely to be some time before things return to normal.
But while a lull during physical distancing is expected, both Burgoyne and Rice expect the Ottawa market to bounce back.
Burgoyne, for instance, was surprised at how many new listings popped up in the resale market as physical distancing took hold.
In the two-week period from March 11 to 25, there were 1,342 new listings in Ottawa, compared to 1,356 for the same two-week period last year.
“Clearly there are buyers and sellers and realtors that are going, ‘You know what? This might be a good opportunity for us,’” says Burgoyne.
On the new-home side, Rice fully expects COVID-19 to have an effect, “but the extent to which the virus and protective measures have on sales numbers is yet to be seen. We do expect though that consumers and builders will seek out and find new and innovative ways of using technology to sell and purchase new homes.”
Strachan agrees. “Although things have slowed down in the past few weeks, we believe there is still pent-up demand that will still be there when things begin to return to normal,” he says. “When that happens, or what ‘normal’ will look like, remains to be seen.”
And Burggraaf points to Ottawa’s steadiness as a factor in our favour.
“Ottawa tends to be more insulated because it’s a government town and it’s got now a strong economic base with the IT sector out in Kanata North,” he says. Coupled with the Toronto exodus, he says, Ottawa is “a prime destination, so I don’t expect a lull to be very deep or very long, if it ends up dragging because of consumer confidence coming out of the pandemic.”