What should we expect in local resale trends and the rental market in 2018?
The experts point out that Ottawa, blessed with a stable economy including solid employment and decent salary growth, has long been a beacon of market stability when it comes to housing. That’s translated into reasonable house prices, choice in housing types, and a good selection of downtown and suburban neighbourhoods.
And as we move into the new year, those traditions look set to continue.
The market forecast
Ottawa’s resale market enjoyed an excellent 2017, and the next couple of years look promising as well, according to Canada Mortgage and Housing Corporation (CMHC). The agency’s annual forecast, released in the fall, pegs sales growth for 2017 at 12 per cent and forecasts a slight rise this year.
CMHC also estimates the average price of an Ottawa home sold through MLS (Multiple Listing Service) this year will be around $406,000, up from about $383,000 in 2017.
Royal LePage’s resale outlook for 2018 underscores that bright prognostication about rising home prices despite the latest toughening up of mortgage rules that came into effect Jan. 1. Those new rules include the expansion of the mortgage stress test – which measures whether a borrower could continue to make payments if interest rates rise to a pre-determined level – to buyers making a down payment of 20 per cent or more.
While Royal LePage expects first-time buyers and those with smaller budgets in most cities to have more trouble buying as demand for entry-level properties ignites because of the tightening up, the company doesn’t think that spells doom and gloom for the year. It predicts prices this year will rise 4.9 per cent in the country as a whole and 3.2 per cent in Ottawa.
Ottawa’s an “amazing city” in terms of its stable economy and housing market, says Kent Browne, broker/owner of Royal LePage Team Realty. “There’s nothing in the cards in terms of politics or companies moving out of the city (to change that).”
Browne believes the new mortgage rules may produce a sales dip in the first couple of months of this year, but “people will adjust. People will just have to adjust what (kind of home) they’re looking at.”
The Canadian Real Estate Association (CREA) has a very different take on Canadian resales this year. Reiterating a forecast it made back in September, the organization released a mid-December prediction that home sales would tumble 5.2 per cent in 2018 and prices would slip 1.4 per cent. CREA points to the new mortgage regulations as a key factor for the forecast declines.
It’s all about location
In terms of geography, the rural southwest area of Ottawa including Manotick, Munster and Richmond has seen an unusual trend over the past few years: a spike in prices compared to the city as a whole. Prices in those areas have jumped almost 20 per cent since 2012, putting them in the hot market category with the Glebe, Hintonburg and others, according to the Ottawa Real Estate Board (OREB).
However, as the board points out, those rural areas have low populations, so all it takes is a few homes selling for over $1 million to skew the statistics. That’s exactly what happened in the Manotick area.
The move to the rural southwest is part of the larger growth scenario in the south and west of Ottawa, says OREB. A robust high-tech sector and the relocation of National Defence and RCMP operations to the west end have helped fuel that growth as employees decide they’re not interested in the cross-town commute from the east end to those expanding employment areas in the west.
Unfortunately, that shift west and south means prices have risen less quickly or even flatlined in some eastern neighbourhoods.
“Is this (effect in the east) a long-term trend?” asks Rick Eisert, president of OREB until December, 2017. “We will have to wait and see. If prices continue to increase in the west then there would probably be enough of a financial advantage to look at buying in the east end.”
The luxury home market
Aside from having more money, the wealthy aren’t all that different from most of us when it comes to what they look for in a resale home.
Luxury home Realtor Marilyn Wilson says her buyers are looking for “consistent colour palettes of creams, light grey blushes and very soft champagne.” And if the owner of a a high-end home plans to sell, “Don’t paint every room a different colour.”
They are also keen on homes with flooring made of wide-plank wood and heated tile. They like bathrooms with floating toilets and cabinetry. Sleek kitchens with integrated appliances that look like furniture are also in demand. And luxury home buyers also want homes that are easy to clean and with better storage options.
Add it all up – colour choices, handsome kitchens and bathrooms, lots of storage space – and you realize that it doesn’t really matter how much you’re paying, all buyers want basically the same thing: a comfortable, welcoming home where they and their family can live a happy life.
Vacancy rates are trending modestly upward, according to CMHC. Standing at three per cent in 2107, the rate is expected to hit 3.4 by 2019.
The agency says a steady flow of new residents plus “robust growth in the student population” will support rental market demand over the next couple of years. However, construction of new, purpose-built apartments took off in 2017 and when many of those buildings are completed in 2019, there will be an increase in the vacancy rate because new units take time to be absorbed.
CMHC anticipates that rent increases will keep pace with inflation.