A new report predicts Ottawa home prices will continue to fall for the rest of the year as rising interest rates and a lack of inventory dampen sales activity.
In its fall market outlook released Tuesday, Re/Max Canada says it expects the average sale price of a home in Ottawa to drop to about $712,697 by the end of 2023, down two per cent from $727,242 at the end of July.
The report says a declining number of homes for sale is the “most pressing factor influencing activity” in the capital.
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The average price of a residential property in Ottawa fell to $727,000 in July, a decline of nearly nine per cent from just under $798,000 a year earlier, according to Re/Max.
The report is backed up by recent data from the Ottawa Real Estate Board.
OREB said home sales rose 14.6 per cent in July compared with a year earlier. However, transactions have been falling of late, with July’s sales down 24 per cent from the previous month and 35 per cent compared with May.
New listings have also been on the decline. There were 2,234 new properties put on the market in July, OREB reported, down six per cent from a year earlier and a 19 per cent drop from June.
Nationally, Re/Max’s latest report the country’s real estate market will soften this fall with average home prices predicted to remain flat as the housing market deals with high interest rates and a lack of homes for sale.
“We’ve been in this kind of stalemate or stagnation for several months now,” said Christopher Alexander, president of Re/Max Canada.
“We’ll see more of the same for the remainder of the year.”
Mortgage rates have risen sharply as the Bank of Canada hiked interest rates in an effort to bring inflation back to its target of two per cent.
Alexander said younger Canadians – gen Z and millennials – are highly sensitive to interest rate fluctuations, affecting their decisions to get into the housing market.
He said consistency from the Bank of Canada on interest rates could help restore confidence among buyers but inventory levels will continue to be impacted as new homes take time to be built.
In the fall outlook report, Re/Max predicts there will be a few outliers where home prices are expected to increase, including the Greater Toronto Area, Calgary and Sudbury.
Prices in Greater Toronto are expected to rise 2.5 per cent on average by year-end, Calgary prices are seen rising 4.5 per cent, while Sudbury prices are forecast to increase five per cent, according to the report.
Interprovincial migration to provinces with more affordable housing options, such as the Prairies, continues to fare well despite shrinking inventory, Alexander said.
“Immigration numbers are off the charts,” he said. “That’s keeping prices right across Canada relatively in check, but also pushing prices higher in affordable provinces.
“There’s not enough product to meet those demands.”
In Edmonton, the brokerage expects prices to rise two per cent by year-end.
According to a Re/Max survey that accompanied the report, 33 per cent of Canadians who were interested in buying and/or selling a home in the next 12 months said they will wait and see how interest rate changes play out.
Half of the survey respondents, or 51 per cent, said further interest rate increases this year would not change their financial situation or affect their plans to buy or sell a home.
Alexander said the survey highlighted two groups of people – one worried about interest rate hikes and the other concerned about inventory levels in the market.
“It’s been tough to predict this year because you’ve got the Bank of Canada raising and pausing (interest rates),” he said.
“What’s really needed is stability from Bank of Canada so that buyers and sellers can make better-informed decisions.”
The online survey of 1,517 Canadians was done by Leger between July 21 and 23, with a margin of error of +/- 2.5 per cent, 19 times out of 20.
– With additional reporting from the Canadian Press
