Condominium sales were down 17 per cent in Ottawa in the first eight months of 2023 compared with a year earlier, but the sector is gaining momentum as the cost of borrowing has risen and buyers look to condos as a more affordable option to enter the housing market, Re/Max Canada says.
A total of 2,454 condos changed hands in the capital between January and the end of August, down from 2,964 in the same period in 2022, the national network of real estate agents and brokers said in its annual condominium report released Tuesday.
As sales have declined, so have prices. Re/Max says the average sale price for a condo in Ottawa in the first eight months of 2023 was $432,557, a 5.5 per cent decrease from the previous year.
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Still, the company says the condo market could be poised for a bounceback to close out the year.
“Ottawa’s housing market traditionally experiences an uptick heading into the fall market, but September’s Bank of Canada announcement to pause on rate hikes yet again, combined with lower housing values year-over-year have provided greater impetus in the marketplace,” Re/Max said in a news release.
“While higher mortgage rates and stringent borrowing rules continue to weigh heavy on buyers, especially those purchasing their first home, those that qualify are considering a condominium as a first step towards homeownership. Buyer traffic has increased in recent weeks as more listings come on stream, which is a trend that is expected to continue in the coming months.”
Ottawa Real Estate Board president Ken Dekker said there is “still huge demand” for condominiums because of their lower price point.
The average price of a freehold-class property in Ottawa was nearly $710,000 in August, while the average condo changed hands for about $425,000.
“Obviously, interest rates and the (mortgage) stress tests are making it very, very tough on a lot of people,” Dekker said.
Condominium sales volumes were consistently ahead of last year’s pace throughout the summer but fell off in September, with transactions down four per cent from the previous year, according to OREB.
Meanwhile, the average sale price dipped 3.4 per cent last month compared with September 2022.
At the same time, Re/Max said sales activity in higher-than-average price ranges remains robust, especially brisk in the $500,000-to-$550,000 bracket. In addition, the company said the “supply of two-bedroom condos under $600,000 remains tight.”
The report said first-time buyers, particularly young professionals, are “leading the charge” in Ottawa, sparking an uptick in sales in suburban areas such as Barrhaven, Kanata and Orléans as well as in the downtown core.
“Downsizing buyers tend to spend between $650,000 to $750,000, but often find themselves opting for properties closer to the $750,000 price point with better amenities,” the report added.
Dekker said Ottawa’s condo inventory remains tight due in part to a lack of new construction as builders pause projects in the face of rising material, financing and labour costs or convert developments that were originally planned as condos into rentals.
Even if inflation begins to level off and the Bank of Canada cuts interest rates, it won’t necessarily make condo units more affordable, he added.
“It’s all a supply issue,” Dekker said. “We’ll just see prices rise quickly if interest rates go down.”
Chelsea Hamre, a broker with Re/Max Affiliates Realty in Orléans who helped author the new report, agreed.
“Definitely, as inventory gets tighter, we will see pricing go up,” Hamre said, adding she expects condo sales to remain steady heading into 2024.
