By Nancy O’Dea
I know that most of us like to sit and chat about real estate and no one perhaps more than I. It is my passion and what I love to do, so much that I have influenced most of our family to take part!
The past several years have been quite unusual for Ottawa with regard to real estate prices, and as the saying goes: “What a difference a year makes!” The pandemic seemed to create an overall feeling of restlessness among people in many neighbourhoods across the city. Factors like interest rates hovering at record low numbers, people living and working from home due to the pandemic and the persistence of low inventory levels all led prices across the city to see dramatic increases with intense demand in almost all neighbourhoods and categories.
When examining the sales year over year we can see a direct correlation with rising interest rates and the number of sales when looking at our own neighbourhood in Lower Town. In 2021, in the condominium category the OREB sold 144 condos ranging in value from $262,500-$1,392,500. Similarly, in the residential category there were 51 sales (the peak) noted on the OREB ranging in price from $391,500-$1,490,000. These sales were spread rather evenly throughout the year in 2021 with little indication of slowing down. Going back another year when the Pandemic took root with both inventory levels and interest rates being low, sales were similar with 146 condo units being sold and 46 residential sales. In fact during the low interest rate years the average unit sales in the condo category (2019-2021) were 143 unit sales with an average of 42 sales in the residential category.
In December 2021 interest rates were at 3.44%, and the 2022 market exploded out of the gate right after Christmas. Rates began climbing as the Bank of Canada attempted to temper the market due to rising inflation, and by June they had reached 5.04%, when the market seemed to fall off a cliff! We can see that sales dropped, with only 24 residential units selling ($425,000 to $1,015,000) in the year and 131 condos selling ($275,000 to $2,475,000). Many of these sales in both categories moved before June 30, which strongly suggests that the rate reaching 5.0% or more was the tipping point for buyers.
When reviewing the current month of January at the time of writing, there were 35 active listings in the condo category with five firm sales and five conditional sales. This is in contrast to the previous year when 20 condo units had sold by the 31st of January, which is double the sales of this current month. Likewise, in the residential category there was one firm sale in January 2022 in contrast to none currently.
Overall, the residential sale category saw a greater increase in prices during this boom market period which when compounded with rising interest rates may have attributed to the significant slide in unit sales in this category, which is about 47 % of the previous year (51 sales in 2021 and 23 sales in 2022). With condos seeing a less than 10% drop in unit sales in this same period, it suggests that perhaps many buyers pivoted to a more affordable condo purchase while prices were climbing.
What does all of this mean?
Of course, with so little data for the year predicting the market is a challenge. It is fair to conclude that climbing interest rates have indeed had the desired effect and have tempered the neighbourhood sales and prices to some degree and the days of multiple offers have waned
We should begin to see more listings appear on the market, and as spring comes with inflation tempered and folks adjusting to the new normal, we will likely see sales begin to rise as traditionally would be the case in March, with a peak in June.
Nancy O’Dea is a Sales Representative with Engel & Völkers Ottawa Central, Brokerage.