Cooling Housing Market will Shift Trend in Ottawa
Take a look at Ottawa, one of the cities that’s experiencing a significant cool-down in Canada right now, and the numbers may seem grim. Like so many other places, prices are going up while starts, and sales, are dropping off. But take heart, says Abdul Kargbo of the CMHC. Fresh young faces are appearing more and more in Ottawa, and it’s this demographic of first-time homebuyers that are going to be fueling the market in the next coming months.
What Mr. Kargbo says is going to happen is that first-time buyers will start to turn away from single-family homes, the traditional choice for this group, and will focus instead on the cheaper condominiums that can be found right now in the city, especially in the downtown core. He also says that townhomes also prove to be very popular with first-time buyers, and so more activity is likely to be seen here too, when compared with other types of housing.
“Rather than first-time homebuyers going for singles, they’ll be going for condos and possibly townhouses,” said Mr. Kargbo at a CMHC conference last week. “We’ll definitely see an increase in demand in downtown, but what we are equally going to see is the shift.”
The news is somewhat ironic, seeing as how experts around the country have been saying it’s going to be first-time homebuyers that are hardest hit by the mortgage rules that went into effect this summer. Because the rules now require all buyers to have a 20 per cent down payment or face high insurance fees, and with no equity to draw on, it was thought that this group would be the very ones pushed out – the first, and the fastest. But Mr. Kargbo says that while these rules will stem demand for the flashy and pricey condos in other parts of the city, the same won’t be true for cheaper condos – and those are found downtown and in other parts of Ottawa.
“We are not going to see a continuation of higher-priced condos in the downtown being purchased. We’ll see a shift from higher-priced condos into less-expensive condos, and this will be driven by the first-time homebuyers,” says Mr. Kargbo.
Kargbo points to many reasons why it’s first-timers that will be supporting the market. It’s this group, ages 25 to 34 year-olds, that are moving to Ottawa at a faster pace than any other demographic. It’s also this group that needs the cheapest Ottawa mortgages possible, as their average household income hovers somewhere around the $79,900 mark, and it’s the cheaper condos in downtown, as well as the east and southeast areas of the city that are within their price points.
Kargbo says that overall, Ottawa’s entire real estate market will be “relatively stable” throughout the next two years. He also says, “We’re still seeing positive growth, except that the growth rate is not going to be as brisk as we’ve seen in the previous years.”