A shortage of new inventory and tougher mortgage stress tests are putting a damper on the city’s resale housing market, the Ottawa Real Estate Board said after year-over-year home sales declined for the second consecutive month in March.
Members of the board sold 1,511 properties last month, OREB said Wednesday, better than the five-year average of 1,402 for March but a drop of 8.6 per cent from the 1,654 homes that changed hands in the same period a year earlier.
Realtors sold a total of 3,336 dwellings in the first three months of 2019, down slightly from the first quarter of 2018. It was the second straight quarter that resale home transactions fell year-over-year, marking the first time since 2014 that Ottawa’s housing market suffered back-to-back quarterly declines.
OREB president Dwight Delahunt said a lack of quality housing stock in the region is shackling would-be sellers who want to move up in the market but have limited options to choose from.
“Move-up sellers feed the market for first-time homebuyers,” he said in a statement.
The tight supply of housing means available properties are being snapped up quickly – the average number of days residential dwellings were listed before being sold last month dropped 14 per cent over the same period a year ago, while condos spent 36 per cent less time on the market.
Delahunt also said the new minimum qualifying rate for uninsured mortgages introduced last year – commonly referred to as a “stress test” – has cut into buyers’ purchasing power and made potential sellers reluctant to list their properties and shop for new homes.
Although the measure was designed to cool Canada’s overheated housing market, the veteran realtor said it’s actually helped to drive up prices in Ottawa.
The average sale price of a local residential property in March was $480,143, up 7.2 per cent year-over-year. The average condo price, meanwhile, jumped 5.2 per cent to $290,181.
“With high demand and limited supply, prices will continue to be pushed upwards – it’s a simple and fundamental economic principle,” Delahunt said. “Although we appreciate the recent measures the federal government has taken towards affordable homeownership, all three levels of government need to work together at implementing mechanisms that will also restore the supply side of the market.”
The $300,000-to-$449,999 price range continued to be the most sought-after in the residential market last month, accounting for more than 40 per cent of all sales. Meanwhile, nearly half of all condos that changed hands in March were in the $225,000-to-$349,999 price bracket.
Delahunt warned that condo units in the entry-level price range are “near depletion” thanks to a rush of first-time buyers looking to get the best deals.
In his statement, OREB’s president called for policies to help spur more rental housing construction, arguing it would allow more local residents to continue saving up for a home rather than feeling pressured to jump into the market now.
“If there were concrete incentives for investors to purchase properties to lease or develop purpose-built rentals, it could certainly stimulate the rental market,” he said.