As the August 2022 new-home sales numbers show, this summer has not been a good one for Ottawa builders.
Sales have continued to tumble since April, when the city’s red-hot market was brought to a halt by the combination of rising prices, inflation and interest rates, finally reaching a threshold that buyers have been increasingly hesitant to cross.
There were just 55 new-home sales in August, down an astounding 80 per cent compared to the 272 homes sold in August last year, according to the latest monthly report prepared by industry analyst PMA Brethour Realty on behalf of the Greater Ottawa Home Builders’ Association. It’s the lowest level of August sales in more than 40 years — since 1981, says PMA’s Ottawa president, Cheryl Rice.
“August is a traditionally slow month due to summer vacations, but high interest and inflation rates have put further pressures on market demand and sales.”
Slow June & July, too
The poor August showing came on the heels of a similarly slow July, which saw a 63-per-cent drop in sales from the year before, and an equally slow June, which saw a 64-per-cent drop.
Overall, for the year to date, sales are down 22 per cent, with 2,493 new homes sold this year compared to the 3,191 sold in the same period last year.
Rice points to the Bank of Canada’s efforts to cool inflation by raising interest rates — with its overnight rate now standing at 3.25 per cent after another rise in September, the highest it’s been since 2008.
“First-time homebuyers will be hit the hardest with this latest rate increase, with some second-time homebuyers feeling the pinch as well,” Rice says. “With more interest rate increases on the horizon this year, buyers who have been sitting on the fence are likely to stay there until the next increase is announced, and then they’ll make their buying decision.”
She notes that while the resale market has been adjusting to higher inflation and interest rates — with stable price growth, listings on the market for a more normal 30 days and fewer multiple offers indicating a move toward a balanced market — builders “stuck at peak pricing from early 2022 haven’t been able to adapt in the same way.”
MORE: August resale market tumbles
There were several new-home lot releases in August, but few new-home sales to show for it, she says.
“Most builders are holding their prices and offering attractive incentives to boost traffic and generate sales in September and October, when sales activity usually ticks up following the slower summer months.”