Metro Ottawa
Real Estate Trends and Price Forecast
HIGHLIGHTS
Home values in Metro Toronto have been volatile in recent years, see-sawing up and down since 2021.
Industry experts declared market conditions were improving early in the year compared to 2023, but that’s no longer true.
Purchases (demand) are at historic lows, and active listings (supply) are much higher.
A multi-factor analysis identifies Metro Ottawa as a moderate-risk real estate market.
Budgets for home purchases are under strain due to the historically high mortgage rates since their historical lows. Promised rate cuts are delayed because inflation has been more difficult to control than expected.
This article covers:
What is the state of the Ottawa property market?
Where are prices headed?
Should investors sell?
Is this a good time to buy?
1. What is the state of the Ottawa property market?
Home Price Overview
Metro Ottawa has a population of roughly 1.1 million and was ranked 90th among the world's 100 best cities.
The pandemic turbocharged Metro Ottawa's housing market, driving up prices at a remarkable pace and causing aspiring homeowners to be pushed further away from their dreams. And just when they thought things couldn't get trickier, rising interest rates now force even more potential buyers to sit on the sidelines.
For those contemplating selling their homes, waiting until next Spring might bring some advantages if you aren’t in a hurry. Spring is the best time to sell because there is typically less supply. Buyer activity in Canada normally peaks in May. Families like to move over the summer so their kids don’t need to switch schools in the middle of the year. This is the typical annual real estate cycle.
Prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high but are expected to fall in late 2024. Patience will be needed because forecasters keep revising their predictions, pushing out the date when they expect rates to drop.
The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be a volatile and unreliable predictor of future price trends.
Ottawa Detached House Prices
Since the peak in Spring 2022, house demand has collapsed. Prices recovered due to meagre supply; however, recently, supply has been rising steadily.
We believe politicians are implementing policies to guide the market toward a typical annual real estate cycle with price growth of 1 to 3% annually – in line with income growth.
Demand (i.e., buyer activity) in Ottawa is low. Many people want to buy a home, but affordability is very low, which is reflected in the number of successful purchases. Significantly fewer people can realize their homeownership dream in these market conditions.
New homebuyers can’t afford to get on the first step of the homeownership ladder, and households who want to climb the next rung (i.e., upgrade to a larger home) can’t qualify for a new mortgage at the current rates.
Meanwhile, the total active listings are trending upward. They are at their highest level in three years.
Ottawa-Gatineau New Construction Home Prices
Prices of new homes are dropping. Some homeowners in new developments might find they will have paid much more than their newer neighbours. Based on economic fundamentals, this trend is likely to continue.
Does this concern you? Read the Pros and Cons of Buying Pre-sale Homes
Even though the market is softening, there is a record number of homes under construction.
Market Risk
Mortgage Sandbox Analysis indicates Ottawa is at moderate risk of a significant market correction.
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Metro Ottawa Condo Apartment Prices
After breaking records during the pandemic, Metro Ottawa apartment values are flat. Compared to other Canadian cities, an Ottawa condo is still relatively affordable.
Purchases are much lower than in most of the previous three years.
With more people working from home, we expect developers will begin marketing larger (i.e., 2 and 3 bedrooms) apartments to meet buyer preferences. As the supply of more generous floor plans comes to the market, it may depress the values for small floor plan condos.
At Mortgage Sandbox, we would like developers to build 4 and 5 bedroom condos because:
Not everyone can afford to buy a house for their family.
Canadians who work from home need more room to segregate workspace from living space.
Many Canadians with longer working hours find it challenging to stay on top of necessary house upkeep (i.e., mowing lawns, clearing eaves, shovelling sidewalks).
Many people prefer to live in higher-density neighbourhoods with all the essential amenities within walking distance.
Metro Ottawa Townhouse Prices
Still a challenge for first-time homebuyers
Ottawa house prices have become much less affordable. A homebuyer household earning $84,000 (the median Metro Ottawa-Gatineau household before-tax income) can get a $290,000 mortgage. If they were to save a $73,000 down payment, they could only buy a home valued at $365,000. The Median condo apartment price is over $440,000, so for them to buy a typical condo apartment, a household needs an inheritance or a very generous gift from family. For most people, that is not possible.
How much home can you afford?
Our mortgage calculator takes uses up-to-date mortgage rates and calculates the price of a home you could afford.
What about the rest of Canada?
Read the Toronto Forecast, Montreal Forecast and the Vancouver Forecast.
2. Where are Ottawa home prices headed?
There is a lot of uncertainty in the forecasts for 2024, 2025 and 2026. Many of the forecasters we've surveyed have different expectations for:
Will the federal government achieve its aggressive immigration targets?
There is no consensus among economists.
How do we arrive at our forecast range? Check out our full assessment of the five factors that drive these forecasts. These five forces help explain why several forecasters are anticipating price drops.
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At Mortgage Sandbox, we provide a price range rather than attempting a single prediction because many risks in real estate can impact prices. Risks are events that may or may not happen. As a result, we review various forecasts from leading lenders and real estate firms, and we then present the most optimistic estimates, the most pessimistic prediction, and the average forecast.
Do you want to learn more about real estate risk? We've written a comprehensive report explaining the uncertainty level in the Canadian real estate market.
Our forecast inputs:
3. Should Investors Sell?
From a seller’s perspective, more changes in the market influence prices downward, so now may be a better time to sell than in two years, and the annual real estate cycle usually favours sellers in the first half of the year.
Sellers should always consult a mortgage broker early to prioritize flexible loan conditions and reduce the risk of mortgage cancellation penalties. Find out more about the benefits of a mortgage broker.
Planning to Sell? Check out our Complete Home Seller’s Guide.
Find a local Mortgage Broker
Our FREE app matches you with local pre-screened brokers who share complementary working styles.
4. Is this a good time to buy?
It’s hard to say. Interest rates (borrowing costs) are high and supply is rising, so prices could begin falling. It's almost impossible to time the market. If you are buying your forever home and don't plan to sell it for ten years, then the risks of buying it now are lower.
Regardless, the annual real estate cycle usually favours buyers in late summer.
If you are thinking of buying, drive a hard bargain and pay as close to market value as you can. Don't bite off more than you can chew when it comes to financing.
Planning to Buy? Check out our Complete Home Buyer’s Guide so we can walk you through the end-to-end process and get you ready to buy your new home!
Here are some recent headlines you might be interested in:
Toronto newcomers paying up to 12 months' rent up front to secure housing | CBC News
Sales of new and presale condos plummet in the GTHA, data firm says | CBC News
Wave of mortgage renewals drives owners to list homes, analysts say | Global News
Supply in Canada's property market surges as mortgage renewals loom | Reuters
Young People in Canada Are Trading Toronto for Cheaper Suburbs and Cities | Bloomberg
‘It’s crickets’: How sellers are getting creative in a slow housing market | Global News
Ottawa home prices increase 1.6 per cent in April | CTV News
These are the areas where Ontario housing prices could see the biggest drop | CTV News
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