Why Ottawa will have the best winter sales in a decade or more

sales should help “warm” Ottawa winter

Ottawa real estate normally pretty much hibernates from late November to late February but this may not be the case this year.  Buyers and sellers will want to consider the following factors and consider whether they wish to move up their buying or selling plans accordingly:

 

Listing inventory at decade lows:
The level of available properties to purchase continues to be extremely low and the number of new listings coming on the market, shows no signs of reversing this trend. Supply/demand alone would suggest that this has to put more upward pressure on selling prices.

Residential listings are currently 17.5% lower than last year, 35.5% lower than 2016 and 48.8% lower than 2015.

Condo listings are 34.5% lower than 2017, 45.5% lower than 2016 and 55.8% lower than 2015.

Even rental listings are down quite significantly, 31.6% lower than last for MLS rental listings.

Beat the price increase!  Your next house is going up $2-3K a month!

With residential prices on the way up (+5.7% through Oct 2018) that dream house is getting more expensive day-by-day.  For example:  a $500,000 property today may well be $525,000 or even $530,000 by the end of 2019 peak selling season.  That’s an increase of $2,000 to $2,500 per month and with mortgage rates also headed north, the cost of servicing a mortgage is also increasing.  The mortgage “stress test” which is typically 2% above the mortgage rate being offered is also moving upwards as rates rise thus making approvals more challenging for some buyers.

New construction price and availability:
Builders are also facing limited availability, after two record years of sales and also are facing some labour shortages and price pressure.  All of these factors will also continue to push up the price of new construction.

Mortgage rates:
Rates are pretty well guaranteed to rise a half point in the next 6 to 12 months, with an outside chance of going up a full % point.  This adds challenge to the approval process (mortgage stress test) and monthly cost for buyers and homeowners, so buying now and locking in at a lower rate will have some advantages. *new construction buyers will have to make sure they get a guaranteed rate from their mortgage broker or bank to cover them for the longer new build timelines.

Local economy is strong:
The local economy seems pretty solid regarding employment and there appears to be no signs of the Federal Government doing any significant belt tightening in advance of next year’s election. (Though one never knows?)  So our market should continue its current moderate upward path in the immediate future.

Provincial and municipal budgets:

A “new” city council in Ottawa is in place and we also have a relatively new Provincial government in Toronto.  The Provinces’ fiscal challenges are well noted and there are also signs that the City of Ottawa has its own issues.  Here are a few things that could happen that might add cost for buyers and sellers:

  1. If Ottawa council feels really in a budget pinch, is it possible that a Municipal Land Transfer Tax (MLTT) could be implemented here? This would add $5,000-$10,000 to the typical residential purchase transaction cost here and would cause a bubble and price run up in advance of implementation.   To put this in perspective: the total land transfer tax on a $500K home would jump to almost $13,000 and $21,000 for a $700,000 home purchase.
  2. What is the Provincial government going to do to fix their huge fiscal problem? Could they raise the level of the Provincial Land Transfer Tax? Add some other “luxury” or other tax on housing?
  3. Could Ottawa raise development charges which once again adds to the cost of new construction homes and condos?
  4. What effect will “inclusionary zoning” have on costs of new construction? This principle requires builders and developers to include provision for lower cost housing in their new projects but will certainly affect the cost of new properties, as it becomes more prevalent in the near future.
  5. Do the Feds have any plans in their National Housing plan that might affect buyers, sellers or homeowners?

 

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage

613-435-4692 oasisrealty@rogers.com

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