Metro Ottawa
Real Estate Trends and Price Forecast

HIGHLIGHTS

• Home values in Metro Ottawa have been volatile in recent years, see-sawing up and down. However, the broader trend since 2022 has been downward.

• While industry experts have declared that market conditions are improving when compared to 2023, purchase activity in 2024 is unlikely to match 2019.

• A multi-factor analysis identifies Metro Ottawa as a moderate-risk real estate market.

• Budgets for home purchases are under strain due to the significant increase in mortgage rates since their historical lows.

This article covers:

1. What is the state of the Ottawa property market?

2. Where are prices headed?

3. Should investors sell?

4. 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 million and was ranked 96 of the world's best 100 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, time is of the essence. Early Spring is the best time to sell because there is typically less supply.

Prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high; unfortunately, patience will be needed because rates are anticipated to remain high until mid-2024.

The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be volatile and is an unreliable predictor of future price trends.

Ottawa Detached House Prices

Since the peak in March 2022, house prices in the Ottawa area have fallen significantly. Government intervention successfully shielded the real estate market from the pandemic-induced recession, but now higher interest rates are weighing on the market.

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.

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 rung of the homeownership ladder, and high rates trap existing owners. Families that want to 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

Based on Mortgage Sandbox Analysis, Ottawa is at moderate risk of a significant market correction.

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 any 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 now work from home need more room to segregate workspace from living space within their homes.

• 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 $82,000 (the median Metro Ottawa-Gatineau household before-tax income) can get a $310,000 mortgage. That isn't enough to buy a benchmark without help from family.

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?

• How long will mortgage rates remain high?

• Will Canada experience a shallow or deep recession?

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.

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:

• CMHC Housing Outlook

• Moody’s Analytics - Canada Housing Market Outlook

• Fitch Ratings Global Housing Forecast

• Reuters Housing Forecast Poll

• Royal LePage House Price Forecast

• RE/MAX Housing Market Outlook

• Canadian Real Estate Association Quarterly Forecast

• RBC Home Resale and Price Forecast

• TD Bank Economic Housing Outlook

• BMO Housing Outlook

• Central1 Economics Ontario Housing Forecast

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.

4. Is this a good time to buy?

It’s hard to say. Prices have been falling, but interest rates (borrowing costs) are high, which means prices could fall further. It's almost impossible to time the market. If you are buying your forever home and don't plan to sell for ten years, then the risks of buying now are lower.

Regardless, the annual real estate cycle usually favours buyers in late summer.

If you are thinking of buying, be sure to drive a hard bargain and pay as close to market value as you can. As well, when it comes to financing, don't bite off more than you can chew.

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:

• Bank of Canada: era of very low rates is likely over, people and firms must adjust (Reuters)

• Bank of Canada deliberations show some felt rates may need to rise higher (Global News)

• Bank of Canada likely done raising rates, to cut by mid-2024 say economists: Reuters poll (Reuters)

• Rising rates on homeowners and the shocks that lie ahead (CMHC)

• Upcoming mortgage renewals have homeowners concerned (Edmonton Journal)

• Canada is in for a cooler winter in real estate as sales slow: CREA (Global News)

• Home Prices in Canada Are So Stretched That Even Owners Want Them to Fall (Reuters)

• Posthaste: The risk of forced home sales is rising in Canada, warns economist (Financial Post)

• B.C. real estate market notches downward amid climbing interest rates, association says (Vancouver Sun)

• LACKIE: Bleak times for Toronto real estate market (Toronto Sun)

• Calgary Real Estate Board reports 17 per cent increase in October home sales (Calgary Herald)

• Vaughn Palmer: End of the line for single-family neighbourhoods in most of B.C.(Vancouver Sun)

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