A Look at the Ottawa Real Estate Market in 2023
The last few months have seen a lot of change in the nation’s capital. Like other housing sectors across Canada, the Ottawa real estate market experienced a shift from the heated activity during the pandemic, from decreasing demand to moderating prices.
According to the Ottawa Real Estate Board (OREB), residential property sales declined 42 per cent year-over-year in November, totalling 1,456 units. This was a trend across all property categories, including condominiums, which fell at an annualized pace of 50 per cent. The average sales price for a residential-lass property declined five per cent to $680,031, while the average price for a condominium-class home slid four per cent to $415,533.
Overall, in the first 11 months of 2022, the average sale price rose eight per cent for both residential- and condo-class properties.
Industry experts purport that the Ottawa housing market is “adjusting to the post-pandemic world” like every other real estate sector in Canada and worldwide.
“November’s sales were expectedly low given the typical slowdown this time of year but they also reflect today’s economic conditions,” said Penny Torontow, the Ottawa Real Estate Board (OREB) 2022 President, in a statement. “This is not isolated to our local market. Globally, we’re still adjusting to the post-pandemic world and that affects demand, pricing, interest rates, cost of living, supply chain disruptions and more. As a result, those who can, are waiting and watching.”
With more supply coming online, this could prompt further price declines. OREB data show that months of inventory jumped from 0.9 in November 2021 to 3.5 months in November 2022. In addition, new residential listings increased 12 per cent to 1,598 units – well above the five-year average for the month of November, which is 1,398 new listings.
Although new housing construction activity had been robust throughout most of 2022, housing starts were down from November 2021 to November 2022. According to Canada Mortgage and Housing Corporation (CMHC), housing starts plummeted 61 per cent year-over-year, to 532 units.
Overall, the Ottawa real estate market has landed in balanced territory, giving buyers a slight advantage. At the same time, current housing conditions are impacting first-time homebuyers, Torontow says.
“What’s concerning about the current market is the impact on first-time homebuyers,” stated Torontow. “The marked decrease in condo sales, for example, signals that even entry-level properties are being affected. Fluctuating markets, paired with the stress test, are keeping first-time buyers on the sidelines in a tight rental market—with MLS® rentals increasing 27 per cent this year over last.”
So, as the latest housing data show, the Ottawa real estate market is in the middle of a downturn. Will 2023 experience the same downward trend?
The Ottawa Housing Market in 2023
Many parts of the Ontario real estate market are expected to rebound in 2023 as the Bank of Canada’s (BoC) interest rate hikes travel throughout the financial system and higher borrowing costs become entrenched in the national economy.
According to the 2023 Canadian Housing Market Outlook Report from RE/MAX, the Ottawa real estate sector is estimated to record a four per cent gain in sales prices and a 1.5 per cent jump in unit sales.
Local housing experts say in the report that the Ottawa real estate market is witnessing three primary trends: multigenerational living, less upward movement, and more first-time homebuyers.
“First-time buyers in Ottawa are particular about the finishes, style and location of their homes, with many not wanting to spend money on small renovations. As single-family dwellings have become unaffordable to rent, multi-residential properties and tiny or coach home conversions are expected to increase. Rising interest rates are anticipated to continue cooling the market in the next year,” the report stated. “Supply remains an issue in Ottawa, with many new construction developments being halted due to increased development fees and material and labour shortages. The average residential sale price in Ottawa is anticipated to increase by four per cent in 2023.”
Despite winter data being released in the coming months, many industry observers are keeping an eye out for any potential developments or signs for spring. Although the central bank is still expected to raise interest rates in March and April, the institution has stated that the pace of rate hikes will be smaller and slower. Whether this will be beneficial for the Canadian real estate market remains to be seen.
“November’s housing data from across Canada came in as expected – still pretty quiet – and that is unlikely to improve this winter with the Bank of Canada raising rates again last week,” said Shaun Cathcart, the senior economist at the Canadian Real Estate Association (CRA), in a statement. “It will be interesting to see what buyers do when listings start to come out in big numbers in the spring, and even more interesting to see what happens a little later then the Bank of Canada, now widely thought to be at or very near the top of its tightening cycle, starts to eventually cut rates. All the other fundamental factors needed for the market to take off again are still out there.”
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