Will mortgage rates continue to rise?
Rates have been creeping up but it is hard to say what we may see in 2019. Another .25% probably wouldn’t hurt the real estate market too much but anything beyond that will certainly have an impact, when one also considers the mortgage stress test provisions.
Will listing inventory stabilize/improve?
We have seen very low listing inventory conditions throughout 2018, making life difficult for buyers and their agents. Will this continue in 2019? The number of new listings has flattening out somewhat in latter 2018 so we are not falling further behind on listing inventory but this will continue to be a critical factor.
Builders have had very strong sales in both 2017 and 2018, so it is possible there may be a backlog of resale properties to hit the market, once these new home (or condo) buyers are getting closer to taking possession of their new properties.
At what pace will prices grow in 2019?
If there was an anomaly in our market in 2018 it is the fact that resale prices did not increase as much as they might have, given the low listing inventory and supply/demand imbalance in favour of sellers. The average residential selling price was up 5.1% to $446,415 through the end of November and the average condo sold for $278,330, up 2.8% vs last year. Nice improvement but not the runaway sellers’ market some of the headlines would suggest has been occurring. It is possible that the balance of sale % shifted towards lower price condos and townhomes which could have the effect of buffering overall % selling price increases.
What government action could impact our market this year?
Potentially long list here, with a Federal Government election pending, a new Provincial government in Toronto and a new city council in Ottawa.
Ottawa employment and general economic activity should be pretty stable with the current government or a minority government post-election but all bets are off, if a fiscally conservative government gets elected on a promise to balance the Federal books. This would result in Ottawa government and private sector job losses and would chill the housing market.
Our biggest concern is what the Provincial government may do in terms of downloading, should Premier Ford decide it necessary to try and get the disastrous Provincial books in order. Delays or cancellations to funding big projects like LRT2 or other infrastructure projects (Civic Hospital, Library) all could take a bite from the local economy.
Is MLTT coming this year? We are fully expecting that at some time in the next couple of years, the City will join Toronto in the implementation of the Municipal Land Transfer Tax (MLTT), as this would add up to $150 million annually to the city tax revenues, without impacting most taxpayers. Since only 5 or 6% of homeowners buy or sell each year, it is almost the perfect tax, since those not concerned with buying or selling are less likely to get hot and bothered over this type of tax. The impact of an MLTT would be pretty significant for a buyer: on an average residential property this would mean an additional Land Transfer tax (on top of the existing Provincial amount) which would total $10,950 for the buyer of the average $450,000 property and $18,950 for the buyer of a $650,000.
This tax has been in place in Toronto for almost a decade now, without destroying the Toronto real estate market and generating something like $800M a year in tax revenue, so don’t be surprised if this is coming our way! When you think about it, the revenue from such a tax would almost be enough to be able to offer free transit or at the very least, half price transit which would help boost declining ridership.
Will LRT be a success?
The long awaited LRT will be pretty exciting but also nerve wracking in 2019. How well the system launches and is accepted by commuters will have an impact on the “transit oriented development” meme and developer plans/timing to populate high density condos and rentals along the transit route. If we don’t see ridership meet projections then many things could change or be delayed.
What now for Lebreton?
The recent gyrations at Lebreton Flats and the poor sales to date at Zibi, may simply be indicative of the market overall appetite for high end urban condos but there is no question that the recent “failure to launch” will slow sales of any project in that immediate area. After all: who wants to plunk down a pile of dough for a condo that may get built in 3 or 4 years, next to you-don’t-know-what? We think most consumers (and their realtors) will be hesitant to jump headlong in to pre-construction purchases, given the Lebreton saga and current status. Unfortunately, we can’t expect the Feds to be too engaged on this file going in to an election, especially with a new Chairman at the helm of the NCC.
Short of any major worldwide economic event, we see another pretty good year ahead for Ottawa real estate, despite the “cooling” reports you may be seeing throughout the national media. Real estate is very local and all indicators look pretty good as we open the doors for 2019. Our view is that those considering plans will want to move on those sooner rather than later, as prices continue to rise. It is never too early to start both buying and selling plans and getting your Realtor team together, is always a good start!
Best wishes for a happy and prosperous 2019!