Brand New Year!

2016 already? What will it have in store for us in the real estate market in Ottawa?

The real estate market across Canada has some definite hot spots and others that have been flat. Most folks get their information about the real estate market from the newspapers, or other media. CREA, the Canadian Real Estate Council produces stats monthly and they are reprinted in papers and periodicals across the country. News casts and papers frequently have big openers that features lines about the huge gains in real estate giving the general public the idea that their homes are worth perhaps much more than they really are. Generalizing about the market can be a bit misleading when trying to make some business decisions in your local market. It is best to consult with a local Realtor or two to get a true snap shot of your particular market. You should also be aware that there are agents who specialize in certain types of real estate and marketing and selling luxury property is a specialty all on its own.

The Ottawa market was one of the markets that had a weaker performance when compared to what CMHC coined as the “robust” markets in Vancouver or Toronto.

The fundamentals in both these cities are very different from those in the Nation’s Capital region. This market has long been considered a stable market, supported by an economy primarily based in the Public Service. The base is a well educated group of consumers who seem to be conservative in their decision making particularly when it comes to big ticket items. With federal government cut backs in the recent past, many folks were uncertain about their job security. This lack of confidence appeared to result in the real estate market in Ottawa being affected more specifically in the top 10% of the market. In Ottawa this affects homes in the $750,000 range and more. To give you some perspective on this the top 10% of the market, in Toronto it would be $1,600,000 and in Vancouver it would be even higher.

When taking these factors into consideration and looking at the number of homes that are available for sale in this price point in our region and looking at the diminished level of interested buyers, one can see why this piece of the market has been performing so poorly. It is not uncommon to see properties listed for more than 365 days: a frustrating phenomenon to Sellers.
Not everything is bad news in this part of the market. There is a silver lining! With market value assessment in effect, rising property values in these other locales mean rising property taxes as well. While home owners in the other two major cities have been enjoying big value increases, this has come with the price of significant rises in property taxes.

Ottawa has always been the city of slow and steady growth in real estate; no big gains and therefore, generally, no big losses. In markets where there is the constant pressure on prices moving up, buyers often, incorrectly believe, that the market will never re adjust. They believe it will just keep going up forever and as a result they fuel a sense of panic, feeling that they have to get in now or they will never be able to afford a house.

I believe in the adage that what goes up eventually must come down in these sky rocketing markets and prices in housing will hit a ceiling. There will be adjusting in these hot markets. No market can sustain the climb indefinitely. Please note, I have suggested a re adjustment and not a crash.

To be safe when you are in one of these volatile markets one should take a step back and consider your decisions. Does your life plan have you in the house or city for the next five years or are you looking at other employment opportunities that could take you out of the area? If so, then perhaps buying with your plans in flux is not the best option and you may wish to consider renting. You may also wish to consider buying with the prospect that you will hold on to your asset, rent it out, re locate and have it building equity while you are away.

In the upper end there has never been a better time to buy up in Ottawa. There is a large selection of homes in a variety of settings. There are the well known neighbourhoods of Rockcliffe Park and Rothwell Heights that both offer bucolic natural settings and are close to the heart of the city and there is the classic urban location of The Glebe. Further afield Ottawa boasts country estate like living in Cedarhill, Orchard Estates, Rideau Forest and Rural Kanata as well as lakefront properties and newer construction in communities such as the Sunset Lakes developments in Greely. Manotick offers beautiful riverfront living as well as wonderful custom homes in Manotick Estates and large scale homes in Minto’s newest Mahogony development. All that to say, there is something for everyone in the luxury market in Ottawa and it offers some excellent opportunities.

This brings me to financing. As you are aware The Fed in the U.S. has moved to adjust interest rates up. However in Canada, Stephen Poloz, the Governor of the Bank of Canada, has said that the bank will not be adjusting rates at the moment despite moves from the Royal Bank to move mortgage rates up. Although not a large rate increase, RBC has made a move to where the current rates for a 5 year fixed term at RBC is 3.04 percent from 2.94. In Rob Carrick’s words (Globe and Mail ROB, January 7, 2016) it moves a mortgage of $400,000 amortized over 25 years up to $1,901 from $1,181 per month. Not too bad, but it is the slow creep that can become an issue. The question is will others follow?

I have always encouraged our clients to use the services of a Mortgage Broker when looking at mortgage opportunities. Buyers always assume that their bank will give them the best rate because they are an “important” customer and the bank wants to keep them happy. However, they are in the business of making money and have costs they must re coup. Carrick from Globe and Mail suggests Buyers should always shop for a mortgage before signing on the dotted line with their financial institution because it is such a competitive field. He reported today that a quick survey from brokers this week had 5 year fixed rates as low as 2.44 percent, significantly less than RBC’s position.

So you can see that just like you would not necessarily buy the first house you see, maybe you should not take the first rate quote from your bank that you hear and speak to a mortgage broker who will provide you with a variety of options that are in your best interest and not the banks!

It does feel like the Ottawa market has taken a turn for the positive and this has been noted both anecdotally and in the board stats where the market was up for the month of December by 10%.
If you are thinking about a move to either bigger, smaller or a change in lifestyle, now is the time to get your ducks in order. Secure your financing position before you head out and as always the team at Exceptional Properties is just a phone call away to speak about strategy and planning.

Let’s hope that 2016 is a terrific year with health and prosperity for all.