Ottawa’s housing market picked up slightly in August compared with a year earlier, but the leader of the city’s real estate board warned more fluctuations are on the way as would-be buyers contend with high borrowing costs and economic uncertainty.
The Ottawa Real Estate Board says 1,196 residential properties changed hands last month, up six per cent from August 2022. But sales fell 5.3 per cent from July and were 21.5 per cent below the five-year average for August.
The average price of a freehold-class property was $709,739 in August, a 0.5 per cent increase from a year earlier but 5.6 per cent lower than in July.
Whatever Decisive Group did to reach Ottawa’s Best Places to Work list for the third year in a row, it seems to be working.
Meanwhile, the average condo sold for $425,968, a one per cent hike from a year ago and 1.4 per cent below July’s average.
The board said the numbers suggest the higher cost of borrowing money and anxiety about the economy are fuelling continued volatility in the housing market.
The Bank of Canada has raised interest rates 10 times in the past 18 months in a bid to rein in inflation, but decided to hold its key interest rate at five per cent last week. The flurry of rate hikes has likely caused some prospective homebuyers to reassess their purchasing plans and some sellers to hold off on listing their properties until buyers are more confident in their borrowing power again.
“There is no shortage of demand given increased immigration and the large Canadian population cohort entering the market,” OREB president Ken Dekker said in a statement.
“The lack of suitable, affordable housing is a hindrance. High borrowing costs and economic uncertainty are impacting both sellers and buyers, which we expect will continue to result in further market fluctuations.”
Sales of freehold properties were up seven per cent from a year compared with August 2022, while condominium sales increased two per cent.
Although the year-to-date average price of a freehold property has dropped eight per cent from 2022 and condo prices are down 5.5 per cent so far this year, affordability remains a major stumbling block for many potential purchasers.
OREB’s latest report comes just days after the city’s planning and housing committee approved a plan to invest $110 million over the next three years in affordable housing.
However, director of housing services Paul Lavigne told the committee the city would need to spend an additional $375 million to meet demand.
“Even if interest rates were to drop and the economy stabilized, housing will remain out of reach for many Ottawa residents,” OREB chief executive Janice Myers said in a statement.
“Collaboration among all levels of government and stakeholders is vital to improving affordability for homeowners and tenants alike. And we need to expand provincial regulations, allowing four or more residential dwelling units on serviced lots, to promote higher-density housing.”
– With files from the Canadian Press