Ottawa home sales to fall in 2022 and beyond, but prices will stay high: CMHC


Rising interest rates and uncertainty in the job market will combine to cool down Ottawa’s red-hot home resale market a few degrees in 2022 – but not enough to put the brakes on price hikes, the Canada Mortgage and Housing Corp. says.

The national housing agency is projecting total resale transactions in the capital will range between 18,700 and 20,500 this year, down from last year’s total of 20,625. CMHC is forecasting similar totals for 2023 but says it expects home sales to between 17,400 and 20,200 the following year.

Still, the agency is predicting a reduction in demand will do little to rein in steadily rising prices.

CMHC says the average price of a dwelling in Ottawa could hit $750,000 this year, an increase of nearly 16 per cent over 2021’s overall average of $648,099. The agency sees no end in sight to the price hikes, with its high-end projections coming in at $795,000 for next year and $840,000 in 2024.

“Higher mortgage rates will continue to slow demand over the entire forecast horizon,” CMHC analyst Lukas Jasmin-Tucci says in the agency’s spring 2022 market outlook released Thursday. 

“However, the number of sales should remain high from a historical standpoint. The market will move away from overheating, but remain tight enough to maintain upward pressure on prices, which will continue to rise.”

The lifting of pandemic restrictions could also affect the market, CMHC says, if consumers start eating out, travelling and generally spending more of the cash they were socking away during lockdowns.

“This return to pre-pandemic conditions would reduce the ability of households to finance home purchases and lower housing demand,” the report says. “This would then position sales at the lower end of our forecast range.”

CMHC also predicts housing starts will fall slightly in 2022 from last year’s total of 10,221, due to a “limited availability of resources in the construction sector” as well as the rising cost of materials, supply chain bottlenecks and an uptick in the rental vacancy rate, which the agency says could dampen new apartment construction.

CMHC predicts starts will then start rising again in subsequent years as demand for housing, especially multi-unit projects, continues to grow.

“The upper end of our forecast range will slightly exceed the historical high reached in 2021,” Jasmin-Tucci said in the report. “Population growth, supported by a gradual return of migration, should increase housing demand.”

The agency says it expects the rental market to rebound in 2022, thanks largely to an uptick in immigration, students returning to campuses and a rise in youth employment.

“In addition, the strong price increases recorded on the resale market over the past two years have limited access to homeownership for some renter households,” CMHC said, citing the war in Ukraine as another potential source of demand if refugees start relocating to Canada’s capital.

“Growing demand should be strong enough to lower the vacancy rate despite the large number of new rental units that should be added to the market in 2022,” Jasmin-Tucci said. “In 2021, nearly 1,200 rental units were started, and a large proportion of them will be completed in 2022. This, along with the end of the 2021 rent freeze in Ontario, should put upward pressure on rents.”

Meanwhile, CMHC says it expects home sales to level off on the Gatineau side of the river this year before falling in 2023 and 2024.

After topping 6,000 a year ago, transactions should range between 5,300 and 6,100 this year, the agency predicts – potentially snapping a streak of seven consecutive years in which sales increased. 

CMHC says it then expects sales to decline further over the next couple of years, due to a combination of rising interest rates, limited supply, slower employment growth and “lower transaction potential.” It’s forecasting sales to reach a high of 5,800 in 2023 and 5,500 the following year.

At the same time, the agency believes prices will keep rising, from an overall average of about $413,000 last year to as much as $488,000 this year. 

CMHC says average housing prices in Gatineau could crack the $500,000 mark in 2023 and reach nearly $560,000 the following year.

“Supply is at a historical low and should remain limited for the duration of the forecast horizon,” Jasmin-Tucci said. “Therefore, seller’s market conditions will likely persist through 2022. This will keep upward pressure on the average price.”

The agency is also predicting that housing starts in Gatineau will continue to slide.

Since surpassing 3,400 starts in 2019 – their highest level in nearly five decades – new builds have declined in each of the past two years. CMHC is projecting starts will drop to a high of 2,700 by 2024 as a result of slower population growth, a shortage of skilled tradespeople and rising interest rates.