New home sales up 140% in Ottawa in January, but market challenges remain: GOHBA

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New home sales in Ottawa more than doubled in January compared with a year earlier but were still well below the five-year average for the month, the Greater Ottawa Home Builders’ Association said Tuesday.

A total of 276 new homes were sold in the city last month, up from 115 in January 2023, according to data compiled by PMA Brethour Realty Group in partnership with the GOHBA.

January’s five-year average for new home sales in Ottawa is 393. The high-water mark for new home sales in that period happened in January 2022, when 588 new homes were purchased.

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“While the upward trend is encouraging, it is important to highlight the ongoing challenges and fluctuations within Ottawa’s housing market,” GOHBA executive director Jason Burggraaf said in a news release on Tuesday. “This underscores the need to continue our collective focus on the supply of homes and access to housing.”

New home sales in Ottawa fell nearly 50 per cent over the past two years as higher interest rates and rising inflation eroded consumer confidence and buying power, Burggraaf told OBJ last month.

In 2019, the year before the COVID-19 pandemic triggered massive supply-chain disruptions that drove up the price of materials, Ottawa homebuyers purchased 6,315 new single-detached homes, condominiums and townhomes.

New home sales dropped to 5,928 in 2020, the first year of the pandemic, and fell further the following year before plummeting in 2022, when the Bank of Canada began a series of hikes that saw its benchmark interest rate jump from 0.25 per cent to five per cent, the highest level since 2001.

Housing starts have also declined over the past couple of years as construction costs have soared and financing new projects has become more expensive, Burggraaf added. 

Last year, there were about 8,600 housing starts in Ottawa, most of them apartments, according to the Canada Mortgage and Housing Corp. That’s down from more than 9,400 starts in 2021.

Townhomes accounted for 54 per cent of new home sales in January. Single-detached houses were next with a 26 per cent share of the market, followed by condo-style townhouse units at 19 per cent.

More than half of all new home sales in December – 54 per cent – were in Ottawa’s south end. The west end accounted for 27 per cent of sales, the east end had a 17 per cent share of the market and about two per cent of sales happened in the city’s core.

Market gaining momentum?

January’s 140 per cent year-over-year sales increase followed a similar bump in December 2023, when new home sales jumped 126 per cent compared with the same month a year earlier.

“While it is early in the year, the data from the past few months suggest that new home buyers are slowly building confidence again, leading to a revitalization of Ottawa’s new home market in 2024 following a challenging 2023,” Burggraaf said.

The January sales figures were released just days after the federal government announced it was providing $176 million to help fast-track construction of tens of thousands of new homes in Ottawa over the next decade.

The City of Ottawa said 90 per cent of the funds will be used for affordable housing, including capital for shovel-ready projects and financial incentives for developments that include affordable units.

The rest of the money is expected to go toward measures that help streamline development approvals, such as electronic permitting and digital applications, and enhanced services.

However, one of the city’s leading property developers said taxpayer dollars would be better spent on upgrading sewers and other infrastructure in neighbourhoods that aren’t equipped to handle additional density.

Claridge Homes vice-president Neil Malhotra told OBJ last week that development fees – one-time charges levied on homebuilders to help pay for growth-related infrastructure expenses – now account for the second-biggest chunk of his firm’s construction costs.

The fees went up nearly 10 per cent last October, and Malhotra expects them to rise even more as the strain on municipal infrastructure grows with each new housing development.

Developers will have no choice but to pass those extra costs on to homebuyers, he said.

“If the city’s working assumption is that development charges are going to pay for all this, it’s going to have a little bit of a negative impact on the housing market at the end of the day,” Malhotra said.

Op-ed: Federal money for Ottawa housing a good step in strengthening the housing continuum

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