Engel & Völkers co-owner John King has had his finger on the pulse of luxury real estate in Ottawa for 30 years, and says the heartbeat of the market is finally settling back into its usual rhythm.
That rhythm, he says, is being driven by a return to typical seasonal fluctuations and buying patterns – where properties sell for more in the spring, and buyers can find a deal in the winter months.
This stability is coming in spite of higher interest rates and inflation. “People are realizing interest rates aren’t going to go down dramatically,” said King. “We’re not going to see two per cent again for a long time.”
While ‘stable’ may not equal ‘perfect’, people are seeing the opportunity.
“The pandemic lasted longer than we all thought,” said King. “But people who need a bigger house or want to downsize are starting to ask themselves, ‘What are we waiting for?’”
Key takeaways from Engel & Völkers’ mid-year report
King says across Canada, the value of homes over $1 million are either growing or maintaining their value.
In Ottawa, emerging trends include homes being viewed as generational assets, baby boomers staying put, land and labour shortages affecting housing stock, and millennials without financial help from family being priced out of the luxury market.
Spring brought the first signs of a more stable Ottawa market for luxury home buyers, with an increase in listings and price stabilization in April and May.
It was also the beginning of a buyer’s market in the $1 – $3.99 million price range.
Properties priced correctly in this bracket sold within 1-2 weeks, while those priced slightly above their worth tended to languish on the market, forcing sellers to relist at a lower price.
When it comes to sellers, increased activity in Ottawa’s high-end rental market indicated they were waiting out the storm by renting out their property, instead of putting it on the market.
But King says these sellers are starting to reconsider now that the market is stabilizing.
Who’s currently buying million dollar homes in Ottawa?
“Luxury is generally defined as the top 10 per cent of your marketplace in terms of sales, so over a million bucks,” said King.
He says the luxury real estate market in Ottawa is consistently stable because there are always people coming and going from Ottawa.
“Ottawa has great sectors here in high-tech, government as well as our professional sports teams,” said King. “That’s what’s fueling us.”
The millennial-ish market: $1 million – $1.5 million
The main demographic in this category are 50-something professionals who have slowly built their equity over their lifetime.
“They’ve bought and sold a few houses over the years, built up their equity, paid down their mortgage and can afford more,” said King.
But people under 50 are breaking into this market too. “They tend to be younger people I call ‘high income earners’,” he added.
That said, millennials (who now range in age from late twenties to early forties) usually need financial help from family to reach the million-dollar market.
That is prompting some buyers to get creative in leveraging their home purchase. For example, King is seeing buyers in their 30s maximize their investment by renting out their house on Airbnb when they’re out of town.
“Despite tighter licensing for Airbnb rentals, I’ve seen a lot of wealth created that way,” said King, adding that it’s not for everyone.
That’s why another common strategy is buying what King calls a “Gladys house” after his Aunt Gladys. “Her wallpaper was floral, she had shag carpet and 70s furniture,” he said.
King says there’s a strong demand for properties like this because they sell for less, are well built and the infrastructure tends to be in good condition due to having just one or two owners.
Renovations are costly, but a lot of people who watch do-it-yourself shows take them on to lower costs, he said. “Rip out the carpet and you’ve got beautiful hardwood. The bathtub might be pink, but it’s in good condition.”
The business owner market: $2 – $3 million
When you look at the sector between $2 – $3.5 million, the buyers tend to be entrepreneurs who built their wealth through small businesses.
Another demographic in this category are families whose long-term homes have appreciated in value and are now generational assets.
Due to low housing stock at this price point, it’s currently a seller’s market and this trend will likely continue for the rest of the year.
The rare birds: $4 million homes and high-end condos
“There’s only been four out of 11,000 sales over the $4 million mark, which amounts to 0.0003 per cent,” said King, noting that while these sales are common in centers like Vancouver and Toronto, “It’s just not a typical Ottawa number.”
His clients in this segment tend to be CEOs and professional athletes.
High-end condos are another rare bird property in Ottawa, with just 18 being sold this year.
“People who pay more than a million dollars for a condo need a high net worth to afford the carrying costs, which can exceed $2,000 per month,” he said. “They tend to be older couples or people who want something maintenance free.”
“These buyers are choosing condos for their lifestyle,” said King. “Often it’s a second property, so they’re willing to pay the fees for peace of mind when they’re not there.”
Overall, King expects the market to continue to stabilize as buyers and sellers slowly adjust to the newer, more stable conditions.
But for King and the team at Engel & Völkers, helping a client buy or sell a luxury property is always in season.