Fuelled by robust employment figures and household earnings growth, Ottawa-Gatineau is expected to buck a national trend toward declining housing starts and sales, the Canada Mortgage and Housing Corp. says.
In its 2018 housing outlook released Tuesday, the national housing agency projects that single-detached housing starts will rise in the National Capital Region in 2019 while adding that multiples are also expected to gain momentum next year after a down year in 2018.
Noting that Ottawa-Gatineau is one of the few markets in Canada in which housing resale volumes and prices have risen continuously over the past three years, the agency is predicting that trend to continue into 2020.
CMHC predicts local single and multi-unit housing starts to range from 7,300 to 8,100 units next year, while resales are expected to end up between 17,500 and 19,200 units. Prices are anticipated to range between $417,400 and $432,600.
For 2020, the agency is projecting between 2,800 and 3,200 starts while predicting resales in the range of 17,900 and 20,000 units. The resale price range for 2020 is expected to be between $431,000 and $453,000.
Citing Ottawa-Gatineau’s decades-low unemployment rate and its high average income bolstered by an abundance of federal government and tech workers, CMHC says the region’s residential real estate market is primed for healthy growth for the next few years.
“Ottawa has outperformed because of a healthy economy and the city’s relative affordability,” the report says. “Employment, especially full-time job creation, as well as earnings growth, have been robust since 2016 and have supported home ownership demand despite rising … prices.”
The agency also says a “significant price gap” between new and resold homes makes the region’s resale market attractive, especially to first-time buyers, with more affordable options such as row homes and condos experiencing the strongest sales growth.
But CMHC also warns that rising interest rates and government cutbacks in light of rising federal deficits could dampen its robust growth forecasts.
On the rental front, the agency is predicting Ottawa’s vacancy rate to keep dropping for the rest of 2018 to 1.3 per cent – down from 1.7 per cent at the end of last year – before rising slightly in 2019 and 2020 as new apartment inventory becomes available. CMHC points to rising numbers of immigrants and international students as well as an influx of temporary workers as the main factors driving the city’s tight rental market.
“The fluctuation in the employment of the younger age groups, particularly the first-time buyer group, together with mortgage rule changes and rising interest rates is pushing some potential buyers to rent for longer as well,” the agency said in its outlook.
Nationally, CMHC says the real estate market is expected to moderate over the next two years as the growth in housing prices is expected to slow to more in line with economic fundamentals.
The agency projects housing starts and sales are both expected to decline in 2019 and 2020.
It predicts housing starts for single and multi-unit starts will fall to between 193,700 and 204,500 in 2019, while sales are anticipated to be between 478,400 and 497,400 units. Prices are anticipated to range between $501,400 and $521,600.
CMHC says it expects economic indicators like income and employment to continue to help support demand for housing starts, but these fundamentals are anticipated to slow down to a more sustainable pace.
Rising mortgage rates are also expected to affect housing demand and the resale market.
By 2020, CMHC anticipates demand will continue to shift towards relatively less expensive housing options such as apartment condominiums versus higher-end single-detached homes.
“Over our forecast horizon, housing starts are projected to decline from elevated levels recorded recently. Resales should also moderate while house prices are expected to reach levels that are more in line with the fundamentals,” Bob Dugan, chief economist at the CMHC, said in a statement.
– With files from the Canadian Press