Ottawa’s housing prices levelling out but staying strong

The crazy heat of the real estate market in and around Ottawa following the onset of the pandemic in 2020 seems to have moderated — a little. But the price of a home in Ottawa is still considerably higher this year than it was two years ago and somewhat higher than last year.

According to the Ottawa Real Estate Board’s (OREB) newly released statistics, the average price for a single home or freehold townhouse in Ottawa in August was $730,304, up 12.6 per cent over August 2020, while the average price for a condominium was $413,624, up 5.9 per cent. Houses are also staying on the market a little longer than last year. The average sale time in August 2020 was 14 days. This August it was 21 days.

“We’re seeing more of a levelling out, but the prices are staying strong,” says OREB president Debra Wright. “We’re not having the huge bidding wars with 20 or 30 offers on a property and sales of $100,000 over asking price. There are still occasional small multiple-offer scenarios, but that has always been the case, depending on how motivated a buyer is.”

In general, she adds, the market is a little calmer. “We’re now reaching a settling down. We might see some adjustment from month to month, but overall, we’re holding the price increases reached in 2020.”

Erin Phillips, a broker who heads a team of realtors with Royal LePage, has seen a similar trend. “Prices are holding steady,” she says. We’re not going to see the bidding wars we saw last year but we expect the strength of the market to continue through 2022.”

“It all began with a townhouse boom,” she adds. “Single-family and luxury homes followed suit. Then the low interest rates and the fact that more people were staying home added to the snowball effect.”

The sudden rise in house prices in 2020 was sparked by a combination of historically low interest rates (well under two per cent even for a five-year fixed mortgage), a low inventory of homes for sale and reaction to COVID-19.

“There haven’t been enough homes for sale and there certainly aren’t enough affordable homes available,” says broker Harold McKay of ReMax. “People are holding onto their homes longer than they normally would and when they do sell, they are getting a very high price, which means it’s hard for people to move up or into the market.”

In the past, he adds, homeowners wanting to buy a larger home expected to spend up to $100,000. Now, it is more likely to be as much as a $400,000 differential. Therefore, “fewer people can afford to buy a home, no matter what price range they are in.”

“The price point to get into the market is just too high,” says McKay. “And I don’t see it changing at all. There are too few entrylevel homes for sale and their prices are too high. Construction costs are too high. The carbon tax, which adds to the already high cost of lumber, the increased cost of gasoline for delivery trucks and so on are all driving construction costs up. If the mortgage interest rates stay as low as they are at the moment, some buyers may have enough disposable income to afford the homes they buy, but if the rates ever go up, it’s going to be chaos.”

(There was a period in the 1980s, for example, when mortgage interest rates hit 24.5%, leaving too many homeowners unable to meet payments and walking away from their houses.)

“Last year, I was advising anyone on a tight budget to sit back and wait a bit and keep saving their money,” says Wright. “It’s always hard to buy your first home, and it’s harder and more discouraging if you’re competing with people who seem to have unlimited funds and can drive the price up. By waiting and watching, you risk prices creeping up, but at least, when the time is right, you can buy in a thoughtful, comfortable and informed manner and not in a state of panic.”

“The unprecedented interest in changing properties during the pandemic and the shortage of housing took all of us in the industry by surprise,” she says, noting that the increased interest in larger rural properties has been attributed to more people working from home during the pandemic.

The demand for rural properties has continued and led to an even sharper rise in prices in the area surrounding Ottawa than in the city itself. Valley prices last month averaged an increase of 21 per cent compared to the city’s 11.6 per cent.

It remains a sellers’ market in and around Ottawa. “To achieve a balanced market, we need four to six-and-a-half months’ supply,” says Wright.

While the market is a little calmer and more balanced than it was a few weeks ago, prices remain steady, at close to an average of almost $200,000 more than two years ago. And it is unlikely that prices will drop.