Boost in condo sales helps put Ottawa real estate market back in balanced territory—just right for both buyers and sellers

After spending much of 2015 and part of 2016 in a buyer’s market, Ottawa real estate has moved back into balanced territory thanks to a surge in condo sales.

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“The demand is catch­ing up to the supply,” observes Patrick Morris. “As of the end of November, we’re back into a nice, balanced market. That means there’s a buyer for every house out there; it’s just going to take a little bit of time to find that right buyer.”

Members of the Ottawa Real Estate Board sold 995 homes in November through the Board’s Multiple List­ing Service, compared with 986 in November 2016 —an increase of 0.9 per cent. The real standout was condominium sales. While the condo market has been in the doldrums for a few years, there has been an encouraging uptick in condo sales over the past few months. In November 2016, condo sales were 16.2 per cent higher than in November 2015. In October 2016, condo sales were up 27.2 per cent from 2015.

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We’re very happy to see an increase in activity and an increase in sales in the condo market,” says Patrick. “We’ve had back-to-back months with increased sales, and if this continues, we should see a rebound in the condo market in 2017.”

A drop in inventory levels (i.e., the number of homes on the market), and adjusting prices are key factors that caused the shift from a buyer’s market to a balanced market in Ottawa.

In a buyer’s market, the supply of homes for sale exceeds demand. There are fewer buyers, so prices tend to drop and homes stay on the market longer. In a seller’s market, the opposite occurs: the number of buyers exceeds the number of homes available for sale, so homes sell quickly, and prices tend to go up rather dramatically.

In a balanced market, the number of homes on the market is equal to the demand. There’s a more relaxed atmosphere amid active negotiations, prices increase moderately, and homes sell within a reasonable time frame. “Everybody loves a balanced market,” says Patrick.

New mortgage rules came into effect in October 2016 (see over for more information), which seek to reduce the risk of Canada’s financial system becoming unstable. The new rules require home buyers who put less than 20 per cent down on a home to pass more stringent financial stress tests to secure a loan.

YTD_Chart_Nov.JPGIt’s too early to tell how the new rules will affect the Ottawa market, says Patrick. While he anticipates a slight impact on some buyers who make a down payment of less than 20 per cent, “we don’t expect it to have a major impact on the Ottawa market, because the prices here are so reason­able compared with prices in Toronto or Vancouver. The affordability rate is much higher in Ottawa. Our average price is still fairly consistent—around $370,000— which is what it was last year.” By comparison, the average price in Toronto is just over $782,000.

As for what will happen next year in Ottawa’s real estate market, Patrick says it’s hard to forecast due to uncertainty over interest rates. “It all depends where interest rates are going,” he notes. “Traditionally, when interest rates have increased, sale prices have either remained constant, or they’ve dropped. We don’t know if we’re going to follow the U.S. lead in increased interest rates, but traditionally, if interest rates go up, prices do come down. I think people should be prepared for that.”

On the other hand, says Patrick, “If interest rates don’t increase too much in the next six months, we should have a continued steady market.”

Morris Home Team Recognized at AFP Ottawa Philanthropy Awards

Patrick Morris and the Morris Home Team were honoured in November at the AFP Ottawa Philanthropy Awards in the category of Outstanding Small Business Philanthropist. The Morris Home Team would like to gratefully acknowledge the nomination from Dovercourt Recreation Centre, with whom we’ve had a most fruitful partnership for more than 20 years. We accept this award on behalf of the many small businesses in Ottawa who do so much for their communities every single day. 

ASK PATRICK

I’m a first-time home buyer; how will the new mortgage rules affect me, and how do I stand to benefit from Ontario’s land transfer tax rebate?

house.jpgThe federal government’s new mortgage rules aim to ensure that Canadian home buyers—particularly first-time buyers—can afford the house they want to buy, and that the financial system doesn’t succumb to a housing bubble. As of October 17, all insured mortgages—those where the home buyer makes a down payment of less than 20 per cent—will have to pass a “stress test.” The government is responding mainly to concerns that spikes in house prices in cities like Toronto and Vancouver could increase the risk of defaults in the future, should mortgage rates rise.

The stress test aims to assure the lender that the buyer could still afford the mortgage if interest rates were to go up. The buyer would need to qualify for a loan not only at the negotiated rate in the mortgage contract (for example, as of the date of this article, the special-offer rate for a five-year loan is 2.5 per cent), but also at the Bank of Canada’s five-year fixed posted mortgage rate (cur­rently around 4.64 per cent). The Bank of Canada rate would be used in determining how much house a buyer could afford based on income and debt load.

Although buyers won’t be paying any more for their homes under the new rules, they may need to scale back their expectations. Under the old rules, someone with an income of $70,000, a five per cent down payment, and a monthly debt of $500 would have been able to afford a $370,000 property. Under the new rules, the buyer would be able to afford a $280,000 property.

Positively, first-time buyers in Ontario can apply for a rebate on the land transfer tax (LTT) that they would have to pay when they purchase a property in the province. The LTT is normally based on the value of the home (typically the amount paid for the property). The tax ranges from 0.5 per cent to 2.0 per cent, depending on property value. First-time homebuyers may be eligible for a refund of all or part of the tax (certain conditions do apply). The maximum amount of the refund is currently $2,000; effective January 1, 2017, the provincial government is doubling the rebate to $4,000.

You can look up how much tax you would pay on a property using our Land Transfer Tax Calculator.

HIGH NOTES FOR 2016

We are so excited to once again receive the National Chairman’s Club Award for 2016 for the 17th consecutive year in the Top 1% of over 17,000 realtors across Royal LePage Canada! Additionally, we garnered the #1 position in Ottawa for Royal LePage Performance Realty. A huge and special thank you to our clients who have supported us all year long!

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