Condos Continue to Shine in a Healthy Ottawa Market, Albeit One with Low Inventory

Condo sales in Ottawa boomed over the first quarter of 2019, up 6.8 per cent over the same period in 2018, while the sale of residential properties fell 2.3 per cent, with low inventories affecting both sectors of the capital’s housing market.

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It’s a strong market overall,” observes Patrick Morris, “with some neighbourhoods experiencing multiple offers as demand is exceeding supply, and sellers often selling above the list price. In many neighbourhoods, there is a healthy, balanced market, so demand is meeting the supply in those areas.”

The number of residential properties available for sale has dropped 25 per cent in the first quarter of 2019 over Q1 2018, while the inventory of condos has gone down 43 per cent. “This gives buyers a lot fewer options compared to last year at this time,” comments Patrick.

Although the number of residential property sales decreased in the first quarter this year, high demand for properties pushed the average sale price 6 per cent higher, to $464,462. The most popular price range for residential properties continues to be in the $300,000 to $500,000 range, which represented about 54 per cent of the total number of residential sales for Q1 this year.

In the condo sector, meanwhile, the number of sales rose in Q1 2019, as did the average sale price—which, at $288,081, is 5.8 per cent higher than it was last year for the same quarter. Half of condo sales fell within the $225,000 to $350,000 range.

High employment, affordable housing, and quality of life continue to entice people to come to Ottawa. Besides the rising demand for housing from an ever-increasing population, several factors have contributed to the low inventory of homes for sale.

One is the lack of quality options for potential first-time buyers. More affordable housing in the lower price range, between $300,000 and $500,000, would be needed to address the supply crunch in some areas, says Patrick.

Another factor that has caused a decrease in inventory is reluctance among move-up sellers to put their properties on the market because they are uncertain about the options available to them for their next home purchase.Q1_2019_vs_2018_Chart.JPG

Finally, some potential sellers have held off putting their homes on the market due to the government’s mortgage stress test, which came into effect last year, and has affected purchasing power.

How? The stress test was put in place to help slow mortgage credit growth. Buyers who have a down payment of 20 per cent or more must qualify at the five-year Bank of Canada (BoC) benchmark rate, or at the lender’s rate plus two per cent—whichever is greater. The five-year BoC benchmark rate fluctuates, but as of April 4, 2019, the rate was 5.34 per cent.

Buyers with a down payment of 20 per cent or less must obtain an insured mortgage through their lender. The qualifying rate for these buyers is only the five-year BoC benchmark rate. (The extra two per cent qualifying amount is not applicable to these buyers.)

All Canadian homebuyers who require a mortgage must undergo the stress test (apart from current homeowners who renew their mortgage with their current lender). This has reduced buyers’ purchasing power by up to 20 per cent.

For the time being, inventory levels seem set to remain low, but things could change with government intervention to open up land for affordable housing to be built, or other developments. A change in the weather will also be welcome, as some sellers have been waiting for spring to really arrive before putting their homes on the market.

“It’s a natural ebb and flow in the market. We had a slow, grinding market between 2012 and 2016. In the last two years, it has exploded,” notes Patrick. “We’re nowhere near having a bursting bubble, however, because there is still good, affordable housing in Ottawa compared with  other major Canadian centres.”

SPRING INTO ACTION: Your Maintenance Checklist

Maintaining your home is crucial to preserving its value. By taking small actions throughout the year, you can save money by catching problems early—or even preventing them—before major damage takes place. As soon as the snow thaws, it’s the best time to do the rounds, both inside and outside your home, to make sure everything is working as it should. Hire pros if need be to get the job done right.

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