Home sales in Ottawa have shifted toward more expensive housing types in recent months, fuelled by demand from higher-income households that are better able to weather the pandemic, the Canada Mortgage and Housing Corp. says.
While nearly half of all homes trading hands in the capital sold for less than $400,000 in 2019, less than a third of all transactions between last March and October were in that price bracket, CMHC said in a new report.
The report, released Thursday morning, said buyers are spending more money on home purchases in several major Canadian cities, even as the COVID-19 pandemic causes layoffs and income reductions across the country.
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CHMC said home sales have shifted toward more expensive housing types in Vancouver, Toronto and Montreal as well as Ottawa in recent months.
The federal housing agency attributed the shift to fewer new immigrants, government relief programs that helped Canadians manage costs and pandemic-related employment troubles, which disproportionately kept younger and lower-paid Canadians out of the market.
Higher-end demand
“It’s higher-income households that are continuing to manage to cope with the pandemic, have kept their jobs and their salaries are increasing, so demand at the higher end of the market probably reflects this,” said Aled ab Iorwerth, CMHC’s deputy chief economist, during a Thursday press conference.
“The other aspect that … may be happening is that people are selling condos at the city centres, looking for more single-detached housing further out in the suburbs or in rural communities, and those prices are generally higher.”
His comments came as CMHC released a report analyzing the Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal real estate markets throughout the pandemic.
The agency found the COVID-19 pandemic was no match for these markets, which saw prices, sales and housing starts soar above expectations during the health crisis.
The flurry of housing activity and increases were driven by government relief programs, variations in lockdown measures and pent-up demand for homes and show that many Canadians weren’t letting increased restrictions or dramatic economic situations deter them from buying.
In Ottawa, homes in the $400,000-to-$499,999 price range were most popular in both 2019 and 2020, accounting for 22.3 per cent of transactions last year and 22.6 per cent the year before.
But the proportion of home sales in the upper price segments jumped significantly last year, the report said.
Homes in the $700,000-to-$799,999 range accounted for 7.2 per cent of all sales in 2020, up from 3.5 per cent the year before. Meanwhile, million-dollar-plus transactions more than doubled from two per cent of deals in 2019 to 4.1 per cent last year.
Those findings echo recent findings from the Ottawa Real Estate Board that showed home prices in January jumped nearly 30 per cent from a year earlier as the number of sales in the $1-million-plus bracket quadrupled from 16 to 63.
CMHC’s analysis revealed that lockdowns and other restrictions caused a sharp decline in sales and price levels in the second quarter of 2020, but they had rebounded, moving higher than pre-pandemic levels by the end of the third quarter.
Sales outpacing new listings
In more recent months, CMHC has seen the number of sales outpace new listings, placing upward pressure on prices and keeping prospective buyers of more affordable housing out of the market.
CMHC found early in the pandemic, sales fell faster than new listings in Vancouver, Toronto, Ottawa and Montreal, but this changed in the third quarter, as strong growth in new listings was outpaced by stronger growth in sales.
Depending on how long the trend lasts, ab Iorwerth worries what it will mean for people looking for entry-level or less expensive housing.
He believes there may be people that lost their jobs permanently in the retail sector or others that have been hit hard by the pandemic, but the scale of those losses and their impact on housing is difficult to ascertain at the moment, he said.
In its report, CMHC warns of “major risks” ahead for the housing sector, noting that “employment conditions remain below pre-COVID levels while the high level of supportive government income measures are temporary in nature.” The agency says a full recovery “continues to depend on the uncertain course of the pandemic.”
CMHC’s forecast calls for average home prices in Ottawa to fall from a high end of nearly $500,000 last year to around $450,000 in the second quarter of 2021 before rebounding later in the year and into 2022.
While ab Iorwerth predicts people will return to their normal spending habits and once more frequent restaurants and other urban entertainment venues as the virus is quelled, he said it’s too difficult to predict how long it will take the housing market’s lower end to rebound.
“We are really in the hands of the pandemic,” he said.
– With additional reporting from OBJ staff
