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Ottawa housing: December was quiet; January likely to look bleak

“The truth of it is that the sky actually fell last June and kept falling.”

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Ottawa residents who already own homes have recently experienced buoyant feelings with the release of monthly real estate figures, and they feel richer than they were last year.

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There was some of that buoyant feeling in Ottawa Real Estate Board figures released Thursday. The average sale price for a condominium-class property was $434,973 in December, nine per cent higher than it was in December 2021. The average sale price for a condominium-class property in November had been $415,533.

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On the other hand, the average price of residential-class properties dropped seven per cent to $655,839 between December 2021 and December 2022. The average sale price for a residential-class property in November was $680,031.

But, when January and February 2023 numbers are released, “it’s going to feel like the sky has fallen,” Ken Dekker, now president of the 3,900-member Ottawa Real Estate Board, said Thursday.

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Average prices in January will decline by 10 to 15 per cent compared to January 2022, Dekker predicts. In February, prices will likely decline 20 to 25 per cent compared to the average for February 2022.

The first half of 2023 is likely to show the biggest drop in 60 years for Ottawa, which typically has a very stable housing market, said Dekker, who has been a real-estate agent in the national capital for 29 years.

That’s because prices became very distorted in the beginning of 2022, which will affect year-over-year statistics in the coming months. The winter of 2022 led into a peak for prices in March.

Ken Dekker is the new president of the Ottawa Real Estate Board.
Ken Dekker is the new president of the Ottawa Real Estate Board. Photo by Tony Caldwell /Postmedia

In January, February and March of 2022, prices rose 20 per cent. That’s all gone and then some, Dekker said, so it will make year-to-year comparisons in the coming months look bleak.

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“The media and the public will think the sky is falling. The truth of it is that the sky actually fell last June and kept falling,” he said. “It’s the worst turmoil I’ve seen in 29 years.”

Members of the Ottawa Real Estate Board sold 601 residential properties in December 2022 compared with 857 in December 2021, a drop of 30 per cent. The sales included 466 in the residential-property class, or 22 per cent less than a year ago, and 135 in the condominium-property category, a drop of 48 per cent compared to December 2021.

Traditionally, Ottawa has been insulated from most events, typically seeing annual house price increases of four to five per cent with few blips, Dekker said.

There was a slight decline in 1994-96, when Ottawa experienced the double whammy of federal government downsizing and the bust. The 2008 financial crisis in the United States prompted only a slight, temporary drop in prices.

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But Ottawa has not been insulated from the global COVID-19 pandemic or inflation. Essential purchases such as food have become more expensive. Statistics Canada reported in October that gains in household wealth acquired over the previous year had evaporated.

There are also questions of how increases in the prices of materials and labour will affect the construction of new homes, exacerbating the low supply of new housing.

As interest rates and inflation have climbed, buyers have retreated to the sidelines, Dekker said, so it’s quieter than 2021, but it’s now a balanced market.

In December 2021, there was less than a month’s worth of inventory in Ottawa. That increased to 3.7 months for residential-class properties and 3.9 months for condominium-class properties in December 2022, when there were 699 new listings, compared to 600 a year earlier.

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The average number of listings in December over the past five years was 662.

“We now have the right amount of inventory,” Dekker said.

If interest rates stabilize, he predicts a modest increase in prices in the fourth quarter of 2023.

According to a Re/Max forecast released in December, Ottawa is among the Ontario cities where prices are expected to increase between two to eight per cent in 2023, along with Sudbury, Hamilton-Burlington, Oakville, Brampton, Mississauga, Muskoka, Niagara, Windsor, York Region, Haliburton, Peterborough and The Kawarthas, and Kingston.

There are also changes coming to buying and selling.

Starting this month, some foreign buyers have been banned from buying Canadian homes for two years, although this will not apply to some students, foreign workers or foreign citizens who have become permanent residents of Canada.

The First Home Savings Account, a tax-free savings and investment tool, will also be introduced this year, allowing buyers to set aside up to $40,000 towards the purchase of their first homes.

This spring, the Ontario government will introduce new regulations it says will help make the home-buying process more transparent.

Under the current system, home buyers submit offers, but don’t know the offers and conditions of bids made by competitors. Under the new regulations, a seller may choose to disclose the details of competing bids, Dekker said.

“If the seller says they will have an open-bid process, all of the other people can be notified. It’s more like an auction-type situation.”

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