“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.
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.
It’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.”