What a year it has been in the Capital for real estate. There is no question that we have just experienced a real-estate market that rose like never before, in large part due to the lowest interest rates ever. We witnessed a significant decline in inventory levels that began in the fall of 2019, and those levels became tighter and tighter as pandemic restrictions expanded.
By Nancy O’Dea
This was the perfect equation for the cycle we have just come through. The historically low interest rates, high employment, and low housing inventory collectively resulted in a very competitive market for what little was available.
Although those market conditions have waned, when we look back in review we see that the condo market in the city did not experience the same tension as did properties in the single-family-home category.
However, we still have seen the average sale price in both the residential and condo categories continue to increase despite rising inventory levels: August was no exception, with condo prices up 3.7% and the residential sector up 5%.
This fall will see inventory levels begin to climb and come back to more seasonal levels, and rising interest rates may begin to calm matters, making the buying and selling of real estate less feverish than the panic days during the pandemic. This is actually better for everyone.
Municipal elections do not tend to influence the real-estate market in Ottawa as much as federal elections, and this cycle is likely no exception. Don’t expect ongoing discussions about municipal issues to temper interested buyers. The most likely influence on buyer’s activities at the moment is the stock market.
Additionally, in some segments of the market we might factor in the effect of the Ontario government’s 20% Non Resident Speculation Tax on real estate purchased by foreign nationals. This is a tax above the standard land-transfer tax everyone pays on closing. This tax is applied to all foreign nationals purchasing property in Ontario effective as of March of this year.
Previously, it had only affected purchases in the Golden Horseshoe area which included Toronto; now it is a tax across the province that affects individuals who are not Canadian or not permanent residents who purchase residential property that contains “one and not more than six family residences”. The idea behind this tax is to expand opportunities and widen the net for more Ontarians to be able to get into the market and purchase a home.
The federal government also has an eye on this issue with a focus on implementing a law effective January 2023 that will affect real-estate purchases primarily in urban areas nationally. The question remains just how effective these measures will be in achieving the hopeful outcome of creating more affordable opportunities for Canadians to become homeowners.
There are a few variables that may influence the current real estate market, and it will be worthwhile to monitor over the course of the next several months.
At the moment it does seem that the market has started to pick up since the first of September, with many back into routines of home, work and life. Stay tuned to see how the city’s real estate market fares in the weeks to come.
Nancy O’Dea is a sales representative and private-office advisor of Engel & Völkers Ottawa