Ottawa residential home prices fell an average of five per cent in October compared with a year earlier as sales continued to decline in the face of rising interest rates.
Members of the Ottawa Real Estate Board sold 987 residential properties last month, the organization said Thursday. That’s down 41 per cent from the 1,670 homes that changed hands in October 2021 and far below the five-year monthly average of 1,554 transactions.
It’s the eighth month in a row that home sales have declined year-over-over as the Bank of Canada continues to hike interest rates in a bid to clamp down on decades-high inflation, making the cost of borrowing money to buy a house more expensive.
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Since March, the central bank has raised its key interest rate six consecutive times, bringing it from 0.25 per cent to 3.75 per cent in one of the fastest monetary policy tightening cycles in its history.
“After the volatility of the past two pandemic years, which was unsustainable, the market is correcting and adjusting,” OREB president Penny Torontow said in a statement.
Weakened purchasing power
“The slowdown is compounded by Bank of Canada interest rate increases, which further exacerbates buyer hesitancy and weakens people’s purchasing power – especially first-time homebuyers.”
As sales have fallen, prices are beginning to follow.
The average sale price of a residential-class property in October was $677,873, a five per cent decrease from a year earlier. That’s in stark contrast to year-over-year price increases of well above 10 per cent seen throughout most of 2021 and early 2022 as the housing market boomed.
Condos fared better on the price front last month, selling for an average of $445,691 – up nine per cent from October 2021.
Year-to-date, residential sale prices are averaging $780,390, up eight per cent from 2021, while condos are selling for an average of $456,470, an increase of nine per cent year-over-year.
While Torontow argued that demand for housing is “still high,” she said soaring interest rates, inflation and fears of a recession have combined to shake consumer confidence and prompt some prospective buyers to take a “wait-and-see” approach.
Although homeowners looking to sell “may be understandably concerned about market fluctuations,” she said it’s important for sellers to take a “longer-term perspective” on their investment.
“The significant year-over-year gains of the last two years were not sustainable,” Torontow said. “If you have owned your property for any length of time, your equity has increased significantly and will buffer price corrections. If you buy and sell in the same market, it is all relative.”
Meanwhile, Ottawa’s housing inventory continues to grow as the market cools off.
There were 2,047 new listings last month, an increase of four per cent from 2021 and above the five-year October average of 1,971.
OREB said there is now a 3.3-month supply of residential-class housing, up from one months’ worth of inventory a year ago. The inventory of condos for sale has also jumped, from 1.2 months of supply in 2021 to three months today.