Ottawa-Gatineau Housing Market

[1overcosc]

Those prices are going to have to go way down at some point.. We're approaching the point where the only people able to afford property are people who already own property.

[kwoldtimer]

Originally Posted by 1overcosc

Those prices are going to have to go way down at some point.. We're approaching the point where the only people able to afford property are people who already own property.

I imagine affordability in Ottawa to be better than in many Canadian cities, but yes, if the tech sector craps out again or if government undertakes major cutbacks we could see housing prices drop as we have in the past.

[Vixx]

Yeah some of those prices are ridiculous. But as said in the article, it's almost exclusively an inventory problem. By next year things could be back to normal.

I'm kinda curious to see some numbers about new home builds. I'm sure they are going strong as I see new neighbourhoods sprouting up each time I come back to visit.

[YOWetal]

Originally Posted by 1overcosc

Those prices are going to have to go way down at some point.. We're approaching the point where the only people able to afford property are people who already own property.

Really in Ottawa? Almost everyone I know has a mortgage much much smaller than they could theoretically afford. Sure it is nice not to have to max out your mortgage but these prices are for well located properties and still most working couples could easily afford them. Even in Rockcliffe the average prices was 1.1 Million which buys you what in Toronto? Yet Median incomes are much higher in Ottawa than Toronto.

[Paul29]

Originally Posted by YOWetal

Really in Ottawa? Almost everyone I know has a mortgage much much smaller than they could theoretically afford. Sure it is nice not to have to max out your mortgage but these prices are for well located properties and still most working couples could easily afford them. Even in Rockcliffe the average prices was 1.1 Million which buys you what in Toronto? Yet Median incomes are much higher in Ottawa than Toronto.

Yep. We recently moved here from the GTA. (just outside of Newmarket which is 45 minutes north of the centre of the universe) Ottawa is still very affordable all things considered.

[1overcosc]

Originally Posted by YOWetal

Really in Ottawa? Almost everyone I know has a mortgage much much smaller than they could theoretically afford. Sure it is nice not to have to max out your mortgage but these prices are for well located properties and still most working couples could easily afford them. Even in Rockcliffe the average prices was 1.1 Million which buys you what in Toronto? Yet Median incomes are much higher in Ottawa than Toronto.

Median combined household income in Ottawa is $90,000 a year.

At that income level the maximum mortgage one can get is $580,000, and that's if you have literally no other debt. Home prices even in the suburbs are starting to exceed that price. And with rising interest rates that maximum is going to fall.

Really housing values should not be rising any faster than inflation. By definition, this makes housing unaffordable.

[acottawa]

Originally Posted by 1overcosc

Really housing values should not be rising any faster than inflation. By definition, this makes housing unaffordable.

A city can't have a growing population and restrictions on sprawl and restrictive zoning and stable housing prices. Something has to give.

[YOWflier]

City-wide average price is a fairly useless metric in gauging housing affordability. The only thing I take from it is a YOY city-wide trend indication.

Originally Posted by rocketphish

Bidding wars and madness: Inside Ottawa's sellers' real-estate market

James Bagnall, Ottawa Citizen
Updated: June 8, 2018

...

In fact, the city doesn’t have a single real-estate market. Rather, it has hundreds of them. This is the reality understood by Ottawa’s 3,000 real-estate agents who collectively sold nearly 1,800 homes in May and close to 500 condominiums. Total sales volume: $1 billion.

It means very little to say that residences sold for an average $464,400 last month — up 6.3 per cent from a year earlier — or that condominiums sold for an average $281,250, up 3.4 per cent year over year.

These citywide averages disguise a cauldron of activity, wide price ranges and isolated spots of downright insanity.

...

If one takes the city districts indicated in the article and averages the most "desirable" ones, the affordability picture becomes increasingly poor. It's even worse if you subdivide those districts even further (e.g. by omitting the drag caused by a "less desirable" neighborhood bordering a "desirable" one in the same district).

Increasingly, if you can't afford to get into one of Ottawa's most "desirable" neighborhoods, you're being banished to the 'burbs (or end up in a major fixer-upper).

[Marshsparrow]

doesn't Gatineau still offer decent real estate prices?

[YOWetal]

Originally Posted by 1overcosc

Median combined household income in Ottawa is $90,000 a year.

At that income level the maximum mortgage one can get is $580,000, and that's if you have literally no other debt. Home prices even in the suburbs are starting to exceed that price. And with rising interest rates that maximum is going to fall.

Really housing values should not be rising any faster than inflation. By definition, this makes housing unaffordable.

I think there are many suburbs where you can already get a great house for $580k.

The median income of a "couple family" almost $115k. Using your math that would be a $740k mortgage. Not sure if you already included a downpayment but even $740k gets you a decent sized house in almost every part of Ottawa.

[Acajack]

Originally Posted by Marshsparrow

doesn't Gatineau still offer decent real estate prices?

To some degree but it's not considered a desirable option by perhaps 90-95% of people looking to buy a home in Ottawa.

[YOWetal]

Originally Posted by Acajack

To some degree but it's not considered a desirable option by perhaps 90-95% of people looking to buy a home in Ottawa.

I have always found this strange. Maybe as a non-Ontarian I see it as one city more than someone who grew up here or even moved from Toronto or Montreal but even renters seem fixed to one side or the other.

That said I think the price difference is exaggerated to some extent as it is not always an apples to apples comparison. Gatineau lacks for good urban neighborhoods. I guess Orleans is still more expensive than Aylmer but people that make comparison to Old Ottawa South and the Plateau are being ridiculous.

[Acajack]

Originally Posted by YOWetal

I have always found this strange. Maybe as a non-Ontarian I see it as one city more than someone who grew up here or even moved from Toronto or Montreal but even renters seem fixed to one side or the other.

That said I think the price difference is exaggerated to some extent as it is not always an apples to apples comparison. Gatineau lacks for good urban neighborhoods. I guess Orleans is still more expensive than Aylmer but people that make comparison to Old Ottawa South and the Plateau are being ridiculous.

Of course for a lot of people (especially those without kids) the income tax difference nullifies most of those savings.

For most people when you add everything up it's likely pretty close to a wash.

[acottawa]

Originally Posted by YOWetal

I think there are many suburbs where you can already get a great house for $580k.

The median income of a "couple family" almost $115k. Using your math that would be a $740k mortgage. Not sure if you already included a downpayment but even $740k gets you a decent sized house in almost every part of Ottawa.

I think you're right that there are lots of good housing options for couples with median or higher incomes, good size down-payments and little other debt. The problem is that that excludes a lot of people who would have been able to afford good houses a few years ago.

[YOWetal]

Originally Posted by acottawa

I think you're right that there are lots of good housing options for couples with median or higher incomes, good size down-payments and little other debt. The problem is that that excludes a lot of people who would have been able to afford good houses a few years ago.

I guess theoretically the lower the better but comparatively Ottawa is doing well and I think has a lot of room for further growth.

[orleans_man]

Originally Posted by YOWetal

I think there are many suburbs where you can already get a great house for $580k.

The median income of a "couple family" almost $115k. Using your math that would be a $740k mortgage. Not sure if you already included a downpayment but even $740k gets you a decent sized house in almost every part of Ottawa.

Agreed - 740k would still get plenty of house in Ottawa.

However, 740k seems like a massive mortgage to take on for a family? Everyone's situation is different. But I can tell, that with 2 kids, there is no way I could pull off anything close to 740k let alone 580k or even 480k with only 115k coming in for the household. Maybe other people could stretch it differently?

But just for fun, here are the mortgage facts of a 740k over 25 year mortgage:

@4% over lifetime (Probably impossible, considering historic factors)
Monthly Payment: $3900 (of which ~2500 goes to interest pp in 1st year)
Interest total: $431,000 over lifetime of mortgage

@6% (still histrionically low, but probably more realistic over next 25 years)
Monthly Payment: $4770 (of which ~3700 goes to interest pp in 1st year)
Interest total: $690,000 over lifetime of mortgage

[1overcosc]

Improved monetary regulation relative to the mid 20th century means that double digit interest rates are probably never going to return; 3% will probably be the "normal point" for the overnight rate, meaning about 5% for mortgages.

[roger1818]

Originally Posted by 1overcosc

Improved monetary regulation relative to the mid 20th century means that double digit interest rates are probably never going to return;

Agreed. Also, higher consumer debt would make double digit interest rates devastating for a large percentage of the population, and kill the economy. The government knows this, and won't let them get that high if at all possible.

3% will probably be the "normal point" for the overnight rate, meaning about 5% for mortgages.

For fixed rate mortgages, yes. Variable rate mortgages will average a bit lower.

[acottawa]

Originally Posted by 1overcosc

Improved monetary regulation relative to the mid 20th century means that double digit interest rates are probably never going to return; 3% will probably be the "normal point" for the overnight rate, meaning about 5% for mortgages.

High interest rates weren't in the mid 20th century, they were in the late 20th century, mostly driven by efforts to control inflation. Low inflation in recent years has a lot to do with low labour costs and high savings rates in China. If China ever develops a stable middle class (or if any serious action to address climate change is undertaken) then inflation and higher interest rates are likely to return.

[J.OT13]

As we've seen over the last year or two, there is a huge rise in rental building U/C in Ottawa.

According to this article, a grand total of 83 rental apartments in 2005 and 2006 combined. Claridge is planning 900 units near downtown over the next few years.

Developers racing to cash in on hot Ottawa rental market
David Sali
OBJ
July 6, 2018

A consortium of local developers made headlines this week with an ambitious proposal to build Ottawa’s tallest highrise in a project that will feature more than 1,200 apartments ​– just one of many buildings either planned or under construction that will add to the city’s stock of purpose-built rental units.

Last year, developers in Ottawa started construction on 1,500 new apartment units as developers who’d soured on a soft condo market rushed to meet pent-up demand on the rental side. Yet along with that drive to satisfy a surging market comes questions about whether Ottawa will be able to absorb the anticipated flood of new units.

Claridge Homes, Tamarack and RioCan are among other property developers that are aiming to boost the supply of rental units in the nation’s capital, where the vacancy rate last year fell to just 1.7 per cent, its lowest level in six years, according to the Canada Mortgage and Housing Corp. Average rents, meanwhile, rose to $1,113, an increase of 2.1 per cent over 2016.

The vacancy rate in the central core is even lower – a mere 1.1 per cent downtown, 1.4 per cent in Hintonburg and Westboro North and a microscopic 0.2 per cent in the Glebe and Old Ottawa South. Not surprisingly, average rents in those neighbourhoods are even higher than in Ottawa overall.

To many local developers and real estate experts, it’s a clear sign that Ottawa’s aging stock of rental properties – CMHC says more than 80 per cent of the city’s 62,000 purpose-built apartment units were constructed before 1990 – needs a refresh.

“We haven’t seen an increase in supply for years and years,” says CMHC senior analyst Anne-Marie Shaker, noting a total of just 83 new apartment units were built in 2005 and 2006 combined. “The stock is aging, so builders are seeing an opportunity now.”

Experts point to a combination of factors – from rising house prices, escalating interest rates and stricter mortgage rules to robust employment levels in the 25-to-44 age demographic, the group most likely to rent rather than buy – that are fuelling the growing demand for new apartments.

“Just looking at the residential (housing) market in Ottawa right now, prices have been escalating,” says George Djuric, an investment sales specialist in the Ottawa office of Colliers International.

“And that’s pushing a lot of people out of the marketplace. A lot of them are getting slotted into the rental market just by not being able to afford the homes that they want. So if a product comes out on the market, and it’s appealing and it’s new, it’s exciting, I think that it’s a home run on all aspects.”

He calls the proposed mixed-use complex of three highrises near the Bayview LRT station, with the aforementioned 65-storey tower that will soar more than 750 feet and feature 60 floors of residential units, an example of such a marquee development.

Critics say the proposed towers are too tall and poorly integrated into the surrounding neighbourhood, but Djuric says the Bayview proposal fills an obvious need for rental accommodations near what’s expected to become a bustling transit hub at the intersection of the Trillium and Confederation light-rail lines.

“I think a project like that is going to push the envelope in a city that’s clearly developing and expanding,” he says. “I think it’s a phenomenal project, and I think it’s natural progression in a city that’s seeing a lot of growth real estate-wise. I know there’s been some pushback, but I certainly think that there’s a demand for that type of product right now.”

That project – led by Trinity Development Group, InterRent Real Estate Investment Trust and PBC Real Estate Advisors – might be the biggest single development on the horizon, but it’s far from the only one.

‘Natural progression’

Claridge Homes is building or planning to build up to five separate apartment complexes in the central core that, when completed, will add a total of more than 900 units to Ottawa’s rental inventory over the next few years. The largest one will be a 300-suite mixed-use project in the ByWard Market area that Claridge hopes to get off the ground next year.

Claridge vice-president Neil Malhotra says his company simply saw an opportunity to fill a gap in the city’s red-hot rental scene, particularly in neighbourhoods such as Centretown and the Market.

“It feels like there’s a need for more and more downtown-based rental options,” he says. “As housing gets more expensive and interest rates move up, I think it’s a natural progression that there will be more renters. For us, we’re diversifying and creating options just because we feel that’s where the market’s going.”

Malhotra also says apartment living is an attractive option for many younger residents who like the freedom of not being locked in to a long-term mortgage.

“They just want to be able to pick up and move on,” he says.

Tamarack Homes is also stepping up its presence in the apartment market. The Ottawa-based builder recently started renting its 184-unit 1140 Wellington project in Westboro, which features a mix of luxury one- and two-bedroom suites that were originally intended to be condos.

Max Dumour, the owner of boutique Hintonburg real estate brokerage Blue Panda Realty, is managing the leasing at 1140 Wellington. The veteran broker says demand has been brisk, with 20 per cent of the suites already rented to tenants who will start moving in this fall. Many of them, he says, are recent retirees who’ve decided to downsize but don’t want to buy another house at current prices.

Another major project slated for completion next year is RioCan and Killam Apartment REIT’s 228-suite development near Gloucester’s Blair LRT station. It’s part of a planned multi-phase complex that could eventually include up to 840 apartments.

As bullish as he is on Tamarack’s project, Dumour says he’s not convinced the Ottawa rental market can readily absorb the flood of new rentals expected to appear over the next two to three years.

“I think the same thing is going to happen five years down the road as what we just saw with the condo market,” he says. “I mean, it’s a lot of units. I’m not sure where those people are going to come from.”

But RioCan senior vice-president Jonathan Gitlin says he’s not worried about an apartment glut, adding the east-end project’s proximity to light rail and retail hubs such as Gloucester Centre should make it an appealing option for tenants.

“Regardless of what other product is coming to the market, we’re confident that this will be a successful project and that there will be a great deal of demand.”

http://obj.ca/article/developers-racing-cash-hot-ottawa-rental-market