The New Year brings optimism and while we expect another pretty good year in Ottawa real estate there are still a lot of questions and issues that will shape our marketplace and affect buying and selling plans. Here are a few we think worth watching:
Listing inventory levels:
We had a positive turnaround in 2016 with fewer new listings and total listing levels, after a couple of years of historical records and bloated excess listing inventory . This helped get the market back to a “balanced” market territory in 2016 but just barely. Positive unit sales growth would continue this improvement but a small slip could put us back in buyer’s market territory.
Mortgage rates and qualifying rules:
While there is no reason to suspect significant change in mortgage rates, the mortgage rules and new qualifications may delay first time buyers entering the market. The 4.64% mortgage qualifying rate (vs market rates approx. 2% lower) makes the approval threshold higher for buyers and if this source of new market entrants slows, then “move up” sellers have fewer prospects for their property. Further government moves may also impact the market.
How long does it take the average house to sell?
This is another key indicator on the health of the overall market and it has been going the wrong way for several years now. 2016 (November) year to date the average home has taken 55 days to sell and the average condo 70 days. These compare to 34 days and 27 days, as recently as 2010.
Chronic listings have taken even longer to sell and our newer indicator for CDOM (cumulative-days-on-market) currently stands at 85 days for residential and 112 days for the average condo sale.
New home construction activity and performance:
New home sales were up 15-20% during 2016 after an “off” year in 2015…will this continue? Will this cause a backlog of new home buyers with existing homes to resell thus inflating competition in the resale market?
Many of the marquis new developments are inside the Greenbelt in places like Ottawa East (Greystone), Zibi/Lebreton and Wateridge (former Rockcliffe base). Will these higher end developments draw buyers in sufficient numbers and will that impact suburban sales?
How will the condo market perform in 2017? We have no shortage of projects…are there enough buyers?
With a lot of purpose built rentals coming in the future, (i.e. Lincoln Fields/Westgate/Elmvale), will these challenge investor buyers and owners with increased competition in the rental market?
How will governments impact our market this year?
We are a government town and it is no surprise that our market perked up with the 2016 fiscal year starting in April last year. After several years in the doldrums and tight Federal spending, we had increased spending and headcount and a positive environment with the new government which contributed to improved results.
The provincial and municipal governments have been pretty supportive too; abandoning some measures (increased land transfer taxes, higher development fees) and lots of cash for major infrastructure (LRT, sewer upgrades) and general maintenance.
The Province has upped the land transfer tax rebate limit for first time buyers to $4,000 from $2,000, so that is a plus for 2017.
Will the Feds take further action nationally to attempt to “cool” the super charged Toronto/Southwestern Ontario market? Will the federal National Housing Strategy complicate the nature of local real estate?
Will the Province bring in the long awaited Home Energy Rating and Disclosure Program this year? This program will force home energy audits prior to listing a home for sale and the “energy score” will be published on MLS® listings. This may hurt older generations of homes/homeowners and result in market challenges for these sellers.
Will ongoing increases in utility costs negatively impact some homes/properties more than others?
Higher utility costs are felt most by the 45,000 Ottawa area homes serviced by Hydro One, so will further increases impact sales for these homeowners?
Will the Province and/or the Feds follow BC’s lead and create a matching interest free loan to help first time buyers?
Will our market roar ahead to catch up with much higher price valuations in the rest of southern Ontario? Ottawa has not been participating in the house price increases of other major centres in Ontario over the last 4 or 5 years. Could this be the year we play “catch up”?
We don’t see a lot of new significant or contentious action from either Provincial or Federal governments, as both await the outcome of the Cap and Trade/Carbon Tax program and the host of new mortgage rules. Federal funds should continue to flow and we can see some slightly better average price increases but still probably only inflation level or slightly better.
If you do not have a Realtor helping with your buying/selling plans, now is a great time to sit down and plan, as peak season starts in only a few weeks! If you do not have a Realtor, feel free to give us a call! 613-435-4692 or follow us on social media to keep an eye on Ottawa real estate…it should be an exciting year!