Real Estate

Ottawa Real Estate market discussion

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  • Nov 25th, 2020 11:45 am
Member
Nov 10, 2014
329 posts
397 upvotes
Ottawa, ON
After lagging behind TO and Van for like a decade, Ottawa RE prices finally seem to be picking up over the last couple of years.

Will Ottawa price growth taper as local affordability becomes more of an issue, or will it start trading at ridiculous price multiples compared to local incomes like it is now in TO or Van? Will Ottawa ever ever get its own "Ottawa RE bubble" thread?
Deal Addict
Nov 13, 2013
2341 posts
1136 upvotes
Ottawa
Tadalafil wrote: After lagging behind TO and Van for like a decade, Ottawa RE prices finally seem to be picking up over the last couple of years.

Will Ottawa price growth taper as local affordability becomes more of an issue, or will it start trading at ridiculous price multiples compared to local incomes like it is now in TO or Van? Will Ottawa ever ever get its own "Ottawa RE bubble" thread?
Everyone has their own definition of bubble. On fundamentals Ottawa has huge room for growth as incomes are very high. That doesn't mean much of course much of this is psychological and people in Ottawa are cautious. Others point to the availability of land but I am not sure this is more true than cities of similar size. Certainly not more than Calgary and Edmonton which can expand in all four directions largely without barriers. Ottawa has the Quebec side limitation as well as the Greenbelt and also the Ottawa river that makes the Area between Arnrior and Dunrobin further than it would be otherwise from Downtown. In Central Ottawa I would argue there is much less land available because of the NCC land practices as well as again the Quebec side.
Sr. Member
Oct 2, 2017
702 posts
489 upvotes
Tadalafil wrote: After lagging behind TO and Van for like a decade, Ottawa RE prices finally seem to be picking up over the last couple of years.

Will Ottawa price growth taper as local affordability becomes more of an issue, or will it start trading at ridiculous price multiples compared to local incomes like it is now in TO or Van? Will Ottawa ever ever get its own "Ottawa RE bubble" thread?
The Toronto and Vancouver markets are outliers and not what we should expect all housing markets to behave like. Ottawa is certainly heading that way and it's not a good sign, hell I just saw a 500k middle unit town home pop up a couple of days ago. Everything in Kanata is gone within the week (except that one smaller than 1300sqf home trying to sell for 450k and has a horrible musty dog smell). There are homes going for 450k in dumps like Limoges, it's been an interesting time searching for homes. My favorite is one we went to view and the owners dogs had puked right in the middle of the fourier, and there was also dog shit in the rubber tray mats. smh
I'll see you at the top, cause the bottom is too crowded
Sr. Member
Aug 14, 2007
520 posts
275 upvotes
Ottawa
The demographic of Ottawa is pretty special compare with other cities in Canada, here are the few points: 1. Most family income are in the range of $80k to $200k (middle income family), people who make higher or lower that range will consider to big city like Toronto or Vancouver. 2. Ottawa people are more conservative, maybe due to the career they have choose. 3. Ottawa people love to travel, therefore they don't spend lots of money into their house.

Therefore, I don't see how Ottawa real estate can compare with Toronto or Vancouver. Compare with Kitchener/Waterloo may sound more reasonable.
Newbie
Dec 12, 2013
52 posts
58 upvotes
I just did a search on realtor.ca for town homes around the city and there are quite a few posted for above $450K some of these are not even located that centrally to the city... maybe we will city an Ottawa bubble thread sooner than later haha.
Sr. Member
Aug 6, 2011
590 posts
261 upvotes
StefanW499 wrote: I just did a search on realtor.ca for town homes around the city and there are quite a few posted for above $450K some of these are not even located that centrally to the city... maybe we will city an Ottawa bubble thread sooner than later haha.
I have a small bungalow close to downtown, I can't wait to see a similar property listed and the sold price. I need to refinance it to do RE project. If townhouses go up, mine should go up too.

LIke others, I also think bubble market is very unlikely. Once a particular type of house reach a price, people will look at other types of houses or futher locations or Gatineau. And a price catch up will happen in cheaper sub house markets
[OP]
Deal Addict
Nov 26, 2004
2609 posts
753 upvotes
This is a definition of Housing Bubble.
https://www.investopedia.com/terms/h/housing_bubble.asp
What is a Housing Bubble
A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. Housing bubbles usually start with an increase in demand, in the face of limited supply, which takes a relatively extended period to replenish and increase. Speculators enter the market, further driving up demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.
Based on the above definition, take it for what it is worth, below is my assessment:
Demand: People lining up for new built and resale selling briskly. Smiling Face With Open Mouth
Speculation: I don't see a lot of speculation happening in the market as there aren't that many flips or empty delivered homes in new sub-division.Confused Face
Exuberance: This is very unscientific, but based on reading the sentiment of posters on this thread, I don't see any poster behaving in an "irrational exuberant" manner like some of the ones in the Toronto or Vancouver RE thread. Confused Face
What Causes a Housing Bubble?
Traditionally, housing markets are not as prone to bubbles as other financial markets due to the large transaction and carrying costs associated with owning a house. However, a combination of very low-interest rates and a loosening of credit underwriting standards can bring borrowers into the market and fuel demand. A rise in interest rates and a tightening of credit standards can lessen demand, causing the housing bubble to burst.
Historically speaking, interest rate is still low but higher than a couple of years ago, plus lending standards have already been tighten, so I don't think this is what's fueling the current demand.

This week, signs are indicating that BoC is taking rate increase off the table, and it doesn't look like there will be any future tightening of credit standards.

Therefore, I don't think Ottawa is in a housing bubble, as the market doesn't exhibit any sign or falls in to the classic definition of one. However, things will change if there is change of government in October. But there's still lots of time between now and October and lots of things can still happen.
Sr. Member
Aug 6, 2011
590 posts
261 upvotes
I don't see any bubble anytime soon in Ottawa. Price has a lot of room to grow before it becomes a bubble. Ottawa is even cheaper than Montreal and Calgary.
I don't know much about Edmonton, but it looks undervalued, when considering the city size. But the economy might too much be dependent on the weak OIL industry.

Look at this graph from the RBC Housing Trends and Affordability Report


Image

Original report: http://www.rbc.com/newsroom/_assets-cus ... report.pdf
Sr. Member
Aug 14, 2007
520 posts
275 upvotes
Ottawa
I think we simply try to build a relationship between reported income and real estate price, it gives a misleading information. First of all, the reported income is based on StatCan data, which only report the taxable income in Canada. If the income is not earn in Canada, then it is not included. Think about it this way, Vancouver average income is extremely low compare with rest of Canada. However, if you have visited Vancouver before, the ratio of people driving luxury car are so much higher Ottawa which is one of the highest income city in Canada. Many people in Toronto and Vancouver, they don't report any income in Canada but with a very wealthy life and live in a luxury real estate.

By the way, the market can change quickly. Few months ago, people are worry about interest rate increase....

link...
Member
Nov 10, 2014
329 posts
397 upvotes
Ottawa, ON
I agree with many points made by posters above.

I don't think Ottawa RE is in a bubble right now. I think much of the gain its seen in the last couple of years is actually a healthy correction from a period between 2008~2016 where there was hardly any growth in price despite healthy local incomes.

Question is if the price gains will continue and overshoot the point that can be supported by local income and job market. On the job market side, I don't see Scheer cutting back public spending to the extent causing a RE crash in Ottawa. The most I see is hiring freeze or wage freeze. Federal jobs have a reputation for being stable employment, and this reputation persisted over many Liberal and Conservative governments alike. Tech employment seems promising as Shopify is setting record stock price by the day and Kanata North seems to have no problem attracting companies and investments.

I just don't see a scenario where Ottawa RE prices being propped up by rich foreign buyers in a meaningful way. Weather is too harsh, lack of direct flights to Asia, and the city has a long standing reputation for being "boring". However I do see an increasing number of Asians in places like Barrhaven and Kanata so I may be wrong on this point.

There are a few factors that can sustain these price gains. First are buyers who come to Ottawa because of what is happening in Toronto and Vancouver RE markets. No one really seems to keep statistics on the migration between cities, but I know of many of these buyers and tenants myself. As long as there is a substantial price gap between Ottawa and TO/Van, there will be people coming to Ottawa.

The biggest potential driver for Ottawa RE imo is speculation and FOMO. I think Ottawa job market can support a suburban townhome being priced around 450~500k and central 2 bedroom condo around 400~450k. That is what the average working couple can afford. With Ottawa is quickly approaching this price point, my concern is that increasing prices ends up increasing demands instead of decreasing it thereby forming a bubble. Fast increasing prices attract speculators at home and abroad, and the average working couple in Ottawa will be pressured to buy something now and whatever the current price before they are priced out completely like many families are in TO and Van.
Member
Nov 10, 2014
329 posts
397 upvotes
Ottawa, ON
azmongold wrote: The Toronto and Vancouver markets are outliers and not what we should expect all housing markets to behave like. Ottawa is certainly heading that way and it's not a good sign, hell I just saw a 500k middle unit town home pop up a couple of days ago. Everything in Kanata is gone within the week (except that one smaller than 1300sqf home trying to sell for 450k and has a horrible musty dog smell). There are homes going for 450k in dumps like Limoges, it's been an interesting time searching for homes. My favorite is one we went to view and the owners dogs had puked right in the middle of the fourier, and there was also dog shit in the rubber tray mats. smh
I started looking for another rental last month, but gave up the idea after seeing whats on the market. Demand for suburban town houses or any properties listed sub 450k is insane and outstrips supply by a mile.
Sr. Member
Aug 6, 2011
590 posts
261 upvotes
Tadalafil wrote:
The biggest potential driver for Ottawa RE imo is speculation and FOMO. I think Ottawa job market can support a suburban townhome being priced around 450~500k and central 2 bedroom condo around 400~450k. That is what the average working couple can afford. With Ottawa is quickly approaching this price point, my concern is that increasing prices ends up increasing demands instead of decreasing it thereby forming a bubble. Fast increasing prices attract speculators at home and abroad, and the average working couple in Ottawa will be pressured to buy something now and whatever the current price before they are priced out completely like many families are in TO and Van.
In my circle of friends and family, I always advise them to buy asap. Don't wait, price can only go up or maybe stall. There's very little chance it'll go down in the future, there's no point of waiting, there's no crash coming, if they plan to live in Ottawa for at least 5 years. But now, the market is quite competitive for buyers, so perhaps wait for low season such as next December, but there'll be little choice.
I currently live in downtown Hull and plan to stay here for a couple of years because of family reason. After that I may choose to move to Ottawa. But I started to invest in Ottawa few years ago, because of FOMO one would say. Now, I feel safer, I still have my buying power for my next house in Ottawa. In the worst case, I can still move in my investment, that I bought for cheap.
Sr. Member
May 23, 2017
789 posts
524 upvotes
Tadalafil wrote: I just don't see a scenario where Ottawa RE prices being propped up by rich foreign buyers in a meaningful way. Weather is too harsh, lack of direct flights to Asia, and the city has a long standing reputation for being "boring". However I do see an increasing number of Asians in places like Barrhaven and Kanata so I may be wrong on this point.

There are a few factors that can sustain these price gains. First are buyers who come to Ottawa because of what is happening in Toronto and Vancouver RE markets. No one really seems to keep statistics on the migration between cities, but I know of many of these buyers and tenants myself. As long as there is a substantial price gap between Ottawa and TO/Van, there will be people coming to Ottawa.
Yeah seems like the bubbles in Vancouver/Toronto definitely had foreign money (especially Asian money) as a major contributing factor so I don't think a "bubble" will occur on Ottawa without that. (Steady growth yes, bubble no.) I am also seeing an increase in people coming from Vancouver/Toronto because they are priced out, but again, without foreign money I see this as just increasing growth naturally due to accelerated population growth in Ottawa. As you mentioned, the lack of a direct flight to China as well as the bad weather really hinders this. I would also add the lack of a renowned university--lots of rich Asian kids want to go to UBC/UofT and their parents will buy real estate there as a result; Carleton and OttawaU get some international students too but can't even come close in terms of international reputation. (I don't think the "boring" reputation hinders Asian investors though, if anything it would help because it's seen as a "safer" city.)

On the other hand...despite those factors, I also agree that I feel like I have been seeing an increasing number of Asians in Ottawa in the last few years. Many times when I am eating in a restaurant now I will hear neighbouring groups of people speaking in Chinese--seems to be a lot more than a few years ago. (I live in the west end too.) There also seems to be a ton more Asian restaurants opening up in the city lately. And last time I was at T&T it was a complete zoo...absolutely insane how many people there were! Of course this is all anecdotal--not sure if there are stats on this but I definitely get the feeling that more Asians are coming to Ottawa.
William W wrote: Based on the above definition, take it for what it is worth, below is my assessment:
Demand: People lining up for new built and resale selling briskly. Smiling Face With Open Mouth
Speculation: I don't see a lot of speculation happening in the market as there aren't that many flips or empty delivered homes in new sub-division.Confused Face
Exuberance: This is very unscientific, but based on reading the sentiment of posters on this thread, I don't see any poster behaving in an "irrational exuberant" manner like some of the ones in the Toronto or Vancouver RE thread. Confused Face
Good assessment and totally agree with you on the high demand and lack of exuberance, but I actually somewhat disagree about the speculation, which is nowhere near the point of Vancouver/Toronto but is picking up for sure. The last few years, I've been following a lot of new build releases in Barrhaven/Kanata (mostly looking for my own primary residence). What I've noticed is that once these new builds are completed, a large number of them start showing up in the rental market on Kijiji. Minto Harmony was a big one--a few months ago the first homes in that community were completed and there were a huge amount of listings on Kijiji. I've also seen tons of new builds in South Kanata and Half Moon Bay showing up there. The owners don't seem to be in a big hurry for rent either because I've seen some of these houses sit on Kijiji for quite awhile without rent prices being lowered. So the price growth in Ottawa has not reached the point that short-term flips are common, but clearly there are people speculating on growth in the mid- to long-term. Obviously, I have no idea how many of these are bought up by foreign investors...but (anecdotal evidence again) there were tons of Asians lining up for these new builds in Barrhaven/Kanata (though most may be also for primary residence not speculating), and I have heard that agents do mention an increase in real estate investors from outside of Ottawa (mostly Toronto), including Asians.

I do think the high increase in new build houses over the last few years has been driven up by investors speculating on real estate. (Cashflow is pretty near neutral on these new builds, so I think they are definitely banking on real estate appreciation--if they were looking for cashflow, there are better rental properties in Ottawa to buy than the new builds.) If all of these houses were being bought only by people who are planning to live there, the new communities would take much longer to sell out (and therefore builders wouldn't have as much leverage to raise prices). You still don't see many empty houses in these communities because they are getting rented out, so people still end up living there.

So in summary, I think the demand is absolutely there and the speculation has started (still in early stages though). Still far away from declaring a bubble in Ottawa, but it's not outside the realm of possibility a few years in the future (if speculation/FOMO really get going, things could potentially snowball from there and exuberance will follow).
Last edited by jk9088 on Mar 6th, 2019 2:10 pm, edited 2 times in total.
Member
Jun 15, 2009
361 posts
75 upvotes
Nepean
In the suburb, you can still find good size (around 1900-2000 sq feet) towns priced just around 400.
Tadalafil wrote: I started looking for another rental last month, but gave up the idea after seeing whats on the market. Demand for suburban town houses or any properties listed sub 450k is insane and outstrips supply by a mile.

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