The Ottawa home market has taken on the form of a bouncy castle over the past three years, but for those waiting for the right time to buy or sell, a stable market is on the way.
Many looking to purchase homes in the region have been waiting for prices to drop. But after surging to an average home price of $757,225 in March, the market showed no signs of slowing down this winter.
Now, with interest rate hikes slowing inflation, the market is cooling off—but don’t expect home sales to drop to a pre-COVID state. The Ottawa region is still highly coveted. In the coming months, we may find out where prices will settle, as inflation rates also stabilize.
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Fluctuating real estate prices
When the entire world stepped indoors to limit the spread of COVID-19 in 2020, average home prices in Ottawa soared to $677,129 that same year. For those watching the Ottawa real estate market, and looking for an opportunity to wade in, the almost three years since have been complex and at least a bit anxious.
The buying frenzy was aided by an interest rate that dropped to 0.25 percent early in the year, the lowest since the stock and housing market crash of 2008.
Although prices cooled to $606,943 in 2021, this was still well above the pre-COVID market of $441,693. Buyers were still willing to pay exorbitant prices to get into the game, but most expected the market to drop to more conservative values in the coming years.
That hasn’t happened.
Instead, the impact of the war in Ukraine has prompted inflation to rise even higher, to the highest rates since the early 80s. At the end of 2021, it had looked as if inflation was stabilizing at a rate of just under five percent (4.8 at year’s close), but it picked up again as the war’s impact on energy prices and global supply chains mounted.
Highest inflation rates since 1981
In June, inflation reached a rate of 8.1 percent, the highest since 1981. Before June, the Bank of Canada had made several attempts to curb inflation with successive interest rate hikes. This had little impact until July, when interest rates rose to 2.5 percent. As predicted, inflation finally began to wane, dropping to 7.0 percent by August.
However, to keep inflation trending downward, the Bank of Canada continued to increase interest rates to 3.25 percent, where they sit now (September 2022).
This has had a cooling effect on Ottawa’s scalding-hot housing market. Previously, average home values had risen to $757,225—well above the high water mark set during the first year of the pandemic. But interest rates have a direct influence on borrowing power. That makes home sales one of the biggest impact areas for interest rate hikes.
Since then, the market hasn’t necessarily softened as much as we expected before the war, but buyers have had more opportunity to negotiate, instead of getting caught up in the bidding wars that led to the highest-ever prices for Ottawans.
The interest rate hikes are having a good impact on the market for buyers, but those looking to sell shouldn’t expect to see their property values drop to pre-COVID levels. Just as our market begins to stabilize, Ottawa is getting more recognition as a great place to live.
The city’s population grows by 25,000 every year—and for good reason. People come for well–paying federal jobs, access to a huge network of hiking trails in the Gatineau Hills, a world-class food scene, underrated music and arts culture, and a thriving technology sector.
For these reasons, homes will still be highly sought-after. Even condo prices are performing well, surging to $479,406 (March 2022) in the absence of affordable housing. It’s hard to deny that Ottawa is a real estate market investors and families can rely on.
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Ottawa Real Estate: Getting You the Best Deal
Competition for homes is thick in Ottawa, and all kinds of buyers are eager to enter the strong, reliable market. As home values stabilize, this will only spur sales, as both homeowners and buyers have no cause to feel reluctant about pulling the trigger on a deal.
In the coming months, the supply of saleable homes will restock as interest rates limit the number of prospective homeowners who are legitimately ready to buy. Once there are more homes available, both sellers and buyers should feel confident about entering the market. And if home values stay above $600,000 on average, it might be the start of the new normal in Ottawa.
The Sylvain Bourgon Real Estate Group helps the right home sellers and buyers find each other. We know the happiness of our customers is the most important statistic for us to manage. That’s why we maintain transparent, fruitful relationships with our clients as their needs change. This leads to a relationship of trust and mutual opportunity that outlasts market pressures and fluctuations.
For more information about how we can help you find the right home for you or your family, contact us at info@buyandsellottawa.ca.