Red-hot Ottawa housing market cools off
Starts down, but prices still rising
By Mike Levin - Business Edge
Published: 05/26/2005 - Vol. 1, No. 10
http://www.businessedge.ca/article.cfm/newsId/9567.cfm
--------------------------------------------------------------------------------
It has taken three years for Ottawa's surging residential real estate market to check its pace and 2005 may be a time of consolidation.
Although prices continue to rise, new unit starts have fallen from the record highs set in 2002 and sales have levelled off.
Starts hit a record high of 7,796 in 2002, then declined to 6,381 in 2003 before climbing again to 7,243 in 2004, according to the Canada Mortgage and Housing Corp. (CMHC).
Ottawa Real Estate Board (OREB) sales figures show 12,831 homes were sold in 2002, 12,715 in 2003 and 13,518 in 2004.
Photos by Ashley Fraser, Business Edge
New homes are sprouting up on Flamborough Way in Morgans Grant, a new residential development in Ottawa's west end near Kanata.
Prices rose from an average of $219,400 in 2002 to $235,553 in 2004, according to CMHC. In the first quarter of 2005, the average price was $278,857.
In the first four months of 2005, housing starts declined to 1,234 from 1,911 during the same period in 2004, the CMHC says.
"The kind of growth Ottawa has seen in recent years isn't sustainable and I think the local market, while it still has momentum, is showing that it needs to slow a bit," says Christian Douchant, CMHC's senior market analyst for Ottawa. "Demand is still there. The only real change is that supply has increased past the point of balance."
The root cause is an oversupply of just-completed suburban housing and a return to a wait-and-see feeling among developers.
Other reasons include the impact of political volatility on Ottawa's economy and an employment gap in the trade professions. As many as 8,000 workers are needed in local building and renovation.
Despite the building slowdown, price levels reveal that consumer demand is showing no signs of abating.
As a benchmark, new single-family dwellings in the city now average about $342,000, up 8.6 per cent from last year. Resales average almost $244,000, up 4.4 per cent, according to the CMHC This has pushed some buyers into multi-family buildings, which average about $175,000 across the apartment, condo and townhouse segments.
"Rising prices drove many consumers into multi-family stock and developers pushed the trend along for the past two years," Douchant says. "Builders have become aware that the completed-and-unoccupied has been creeping up during the past few months and seem to be scaling back their activity."
"It's not really that the market is overbuilt, but that it's moving into more of a balanced state," he says.
The stabilization is benefiting patient consumers who no longer face bidding wars in any but the most desirable areas.
Bruce Nicol, vice-president of Tartan Homes, checks out the company's new six-complex condominium.
Although listings in neighbourhoods such as the Glebe and Westboro tend to be snapped up in days, there is more choice within Ottawa's overall market.
"I'm still feeling quite positive, even comparing this year to last," says OREB president Jeff Greenberg. "It may be more of a buyer's market now, but there is nothing negative in sales statistics."
"We added over 2,700 listings in April and these are encouraging numbers for a market that has a very different dynamic compared to the last few years," he says.
That dynamic is most evident in the trends within different types of housing.
According to the CMHC, single-family dwelling starts dropped to 441 during the January-to-May period of this year, from 653 last year. In April, they were down 34 per cent to 175. Multi-family units starts fell from 1,258 to 793 in the year-on-year comparison and were off 36 per cent, to 238, in April.
The worst-hit sector was townhouses, which were down by 50 per cent in the first quarter. Apartment starts dropped 16 per cent in the quarter, but got a spring boost in April when they rose four per cent, according to the CMHC.
"It may be that the condo market is saturated and this spills over in other multi-family sectors. There's been so much new construction in those areas that you have to wonder how many legs it has," says Len Carty, an analyst/appraiser for Carty, Gwilym and Habitat in Ottawa.
"What we're finding is good demand in the central areas, but with suburban inventories increasing there's lot of price competition," Carty says.
Within the city proper, starts rose by 81 to 150 units in April compared to April 2004, although the January to May comparison shows a drop of 13.5 per cent to 397 units.
There were big decreases in the January-to-May period, compared to the same period in 2004: Gloucester, down from 265 to 93 units; Kanata, 297 to 125 units; and Nepean, from 470 to 278 units.
Rural areas such as Osgoode and Rideau townships maintained a year-on-year balance in new construction.
Local builders and developers may be sitting on their tools to some extent, but most believe the current slowdown is temporary.
"We're certainly not anticipating a crash. The spring may be down 20 to 25 per cent, but it's still way better than it was five years ago," says Bruce Nicol, vice-president of Tartan Homes. "There's lots of pent-up construction demand. We're still building stuff that was sold in 2004."
Unlike most developers in the city, Tartan is having an excellent year with more than 200 starts expected in 2005. Part of it comes from a 300-unit, energy-efficient development called Jackson Trails in Stittsville, just west of the city.
Nicol believes Ottawa's real estate market remains healthy because the city has again become a destination, especially for young people entering the rebounding high-technology sector.
"That's a real driving force, retirees leaving and jobs opening up. It's hard to say what the rest of the year will look like, but our projects are aimed at this demographic who see constantly low interest rates and believe home ownership is a wise investment," Nichol says.
CMHC's Douchant says Ottawa's market also is being driven by a mini-boom in government hiring.
Together with the high-tech sector, the local economy is one of the healthiest in Canada and this is reflected by housing prices, he adds.
"We did a survey last year about people's intentions to buy or renovate their homes and discovered that 18,956 (in Ottawa) said they were very serious about buying," Douchant says. "This says a lot about where this market is heading.
"Even though we predicted an 11-per-cent decline in starts for the entire year, which might be revised down even further, this simply indicates we're entering a balanced market," he adds.
(Mike Levin can be reached at levin@businessedge.ca)
Reference:
New housing price indexes for Ottawa-Gatineau
(1997 == 100)
April(2004) : 145.9
March(2005) : 152.4
April(2005) : 152.3
% change (March 2005 vs April 2005): -0.1%
% change (April 2004 vs April 2005): 4.4%
http://www40.statcan.ca/l01/cst01/cpis04a.htm
Starts down, but prices still rising
By Mike Levin - Business Edge
Published: 05/26/2005 - Vol. 1, No. 10
http://www.businessedge.ca/article.cfm/newsId/9567.cfm
--------------------------------------------------------------------------------
It has taken three years for Ottawa's surging residential real estate market to check its pace and 2005 may be a time of consolidation.
Although prices continue to rise, new unit starts have fallen from the record highs set in 2002 and sales have levelled off.
Starts hit a record high of 7,796 in 2002, then declined to 6,381 in 2003 before climbing again to 7,243 in 2004, according to the Canada Mortgage and Housing Corp. (CMHC).
Ottawa Real Estate Board (OREB) sales figures show 12,831 homes were sold in 2002, 12,715 in 2003 and 13,518 in 2004.
Photos by Ashley Fraser, Business Edge
New homes are sprouting up on Flamborough Way in Morgans Grant, a new residential development in Ottawa's west end near Kanata.
Prices rose from an average of $219,400 in 2002 to $235,553 in 2004, according to CMHC. In the first quarter of 2005, the average price was $278,857.
In the first four months of 2005, housing starts declined to 1,234 from 1,911 during the same period in 2004, the CMHC says.
"The kind of growth Ottawa has seen in recent years isn't sustainable and I think the local market, while it still has momentum, is showing that it needs to slow a bit," says Christian Douchant, CMHC's senior market analyst for Ottawa. "Demand is still there. The only real change is that supply has increased past the point of balance."
The root cause is an oversupply of just-completed suburban housing and a return to a wait-and-see feeling among developers.
Other reasons include the impact of political volatility on Ottawa's economy and an employment gap in the trade professions. As many as 8,000 workers are needed in local building and renovation.
Despite the building slowdown, price levels reveal that consumer demand is showing no signs of abating.
As a benchmark, new single-family dwellings in the city now average about $342,000, up 8.6 per cent from last year. Resales average almost $244,000, up 4.4 per cent, according to the CMHC This has pushed some buyers into multi-family buildings, which average about $175,000 across the apartment, condo and townhouse segments.
"Rising prices drove many consumers into multi-family stock and developers pushed the trend along for the past two years," Douchant says. "Builders have become aware that the completed-and-unoccupied has been creeping up during the past few months and seem to be scaling back their activity."
"It's not really that the market is overbuilt, but that it's moving into more of a balanced state," he says.
The stabilization is benefiting patient consumers who no longer face bidding wars in any but the most desirable areas.
Bruce Nicol, vice-president of Tartan Homes, checks out the company's new six-complex condominium.
Although listings in neighbourhoods such as the Glebe and Westboro tend to be snapped up in days, there is more choice within Ottawa's overall market.
"I'm still feeling quite positive, even comparing this year to last," says OREB president Jeff Greenberg. "It may be more of a buyer's market now, but there is nothing negative in sales statistics."
"We added over 2,700 listings in April and these are encouraging numbers for a market that has a very different dynamic compared to the last few years," he says.
That dynamic is most evident in the trends within different types of housing.
According to the CMHC, single-family dwelling starts dropped to 441 during the January-to-May period of this year, from 653 last year. In April, they were down 34 per cent to 175. Multi-family units starts fell from 1,258 to 793 in the year-on-year comparison and were off 36 per cent, to 238, in April.
The worst-hit sector was townhouses, which were down by 50 per cent in the first quarter. Apartment starts dropped 16 per cent in the quarter, but got a spring boost in April when they rose four per cent, according to the CMHC.
"It may be that the condo market is saturated and this spills over in other multi-family sectors. There's been so much new construction in those areas that you have to wonder how many legs it has," says Len Carty, an analyst/appraiser for Carty, Gwilym and Habitat in Ottawa.
"What we're finding is good demand in the central areas, but with suburban inventories increasing there's lot of price competition," Carty says.
Within the city proper, starts rose by 81 to 150 units in April compared to April 2004, although the January to May comparison shows a drop of 13.5 per cent to 397 units.
There were big decreases in the January-to-May period, compared to the same period in 2004: Gloucester, down from 265 to 93 units; Kanata, 297 to 125 units; and Nepean, from 470 to 278 units.
Rural areas such as Osgoode and Rideau townships maintained a year-on-year balance in new construction.
Local builders and developers may be sitting on their tools to some extent, but most believe the current slowdown is temporary.
"We're certainly not anticipating a crash. The spring may be down 20 to 25 per cent, but it's still way better than it was five years ago," says Bruce Nicol, vice-president of Tartan Homes. "There's lots of pent-up construction demand. We're still building stuff that was sold in 2004."
Unlike most developers in the city, Tartan is having an excellent year with more than 200 starts expected in 2005. Part of it comes from a 300-unit, energy-efficient development called Jackson Trails in Stittsville, just west of the city.
Nicol believes Ottawa's real estate market remains healthy because the city has again become a destination, especially for young people entering the rebounding high-technology sector.
"That's a real driving force, retirees leaving and jobs opening up. It's hard to say what the rest of the year will look like, but our projects are aimed at this demographic who see constantly low interest rates and believe home ownership is a wise investment," Nichol says.
CMHC's Douchant says Ottawa's market also is being driven by a mini-boom in government hiring.
Together with the high-tech sector, the local economy is one of the healthiest in Canada and this is reflected by housing prices, he adds.
"We did a survey last year about people's intentions to buy or renovate their homes and discovered that 18,956 (in Ottawa) said they were very serious about buying," Douchant says. "This says a lot about where this market is heading.
"Even though we predicted an 11-per-cent decline in starts for the entire year, which might be revised down even further, this simply indicates we're entering a balanced market," he adds.
(Mike Levin can be reached at levin@businessedge.ca)
Reference:
New housing price indexes for Ottawa-Gatineau
(1997 == 100)
April(2004) : 145.9
March(2005) : 152.4
April(2005) : 152.3
% change (March 2005 vs April 2005): -0.1%
% change (April 2004 vs April 2005): 4.4%
http://www40.statcan.ca/l01/cst01/cpis04a.htm
