Real Estate

Ottawa and Surrounding Area Real Estate market discussion

  • Last Updated:
  • Jan 15th, 2021 11:33 pm
Member
Nov 10, 2014
387 posts
528 upvotes
Ottawa, ON
William W wrote: I completely agree here, as others have already mentioned previously, I think the best value right now is older singles inside the Greenbelt. To me, that's probably as close to as making a defensive move in the market that we are in right now. The analogy I would use to describe the Ottawa RE market is buying in the Burbs right now is like buying Tesla or Nvidia. Yes, valuation is a bit pricey, but market just keep pushing share prices up. Whereas singles inside the Greenbelt is like buying Apple or Microsoft, growth is still happening as they are also hitting historical high, but it is not seeing the same growth rate in share prices as the other high flying tech stocks.

After all, historically speaking, singles inside the Greenbelt tends to fare better than new homes outside of the Greenbelt after a boom, at least, that's how things turn out in stagnate markets in the late 90s as well the Harper years. Of course, i don't think I'm a main stream buyer, but someone that is value driven. For similar prices, I will definitely go with a single in a middle class neighbourhood like Elmvale Acres or Beacon Hill North over a brand new town home in the burbs. Though, looking at my stock portfolio that is mostly made up of dividend paying large cap, I would have been so much better off if I didn't believe in earnings/ratios and just close my eyes and go all in with companies like Lightspeed(LSPD) or Ballard Power (BLDP).
As someone who grew up in Farrhaven, it is surreal to see Ottawa's burbs being compared to something like Tesla lol.
Sr. Member
May 23, 2017
992 posts
745 upvotes
Cashforlife wrote: I just think there are way better options than accepting the idiosyncratic risks associated with buying one house on one street in Barrhaven. By idiosyncratic risk, I mean location-specific risk like new Amazon warehouses, cost of public transit infrastructure that may well require larger and larger subsidies, subsidized housing projects down the street, tech crash/public service mass layoffs, etc.

You should look at the annual unrecoverable cost of owning an income property as being in the 4-5% range on a long term basis. If there is not positive cash flow taking into account what rent people pay for similar houses, walk away because it's not an investment. An investment is something that pays you a dividend, puts money in your pocket reliably, every year. If you are depending on there always being a greater fool who will pay more than you did, you are "specuiating." You need to assume that future buyers have a spreadsheet and know how to use it.

You can get exposure to real estate just by investing in the S&P500. All the constituent companies own a great deal of global real estate. If you insist on putting some low fraction of your assets into real estate qua real estate, consider a REIT that owns properties in many cities.

People say that buying a single property allows you to get levered 4:1. I am not sure these people understand the very real risks associated with high amounts of leverage.

You should look at the price of stocks as reflecting long term earnings expectations, it doesn't have much to do with transient situations like Covid.

You are saying that fixed income loses money. You are not in fixed income to make money right now, you are in it because it tends to be countercyclical with equities. It smooths your portfolio volatility, reduces stress a lot. It is hard to make predictions, especially about the future - just pick an asset allocation and stick with it. Do automatic purchases of something like VGRO or VBAL every payday. And only look at your investments at Christmas.
You keep saying REITs are a better investment than actual real estate but looking at the graph of for example ZRE this definitely doesn't seem to be the case...why don't you post your numbers to prove your point? Doesn't seem to me that you would have made more money that way at all.

In fact, it doesn't even seem like it makes up for the lower return by providing lower volatility--looking at ZRE, the value plunged sharply in Feb/Mar (presumably due to the pandemic) and still has not recovered. Meanwhile, as we all know the actual RE market has hit new highs since then.

I am heavily invested in broad-market stock indexes as well and believe they are excellent investments, but I personally don't feel that investing in a REIT is as lucrative as actual RE investing (it is certainly less work of course--no contest there!). Yes you have more money concentrated in one asset, but if you've done your homework (find properties with good value and positive cashflow in a good location with strong economy and population growth) chances are low that you will lose your shirt (housing is in general more stable than the stockmarket and good locations recover quickly from downturns, meanwhile you can comfortably wait it out as long as your property is cashflowing). Of course, location is key so you really have to be diligent in doing research into what to buy, and also be prepared for the work involved in being a landlord. If that's not your thing, REITs are an alternative option. But, it definitely is not just a cut-and-dry "better" option as you imply. Someone who decided to get into actual real estate in Ottawa rather than buying a REIT a few years ago would be so much further ahead.

Will this continue to be the case? Well no one has a crystal ball but you've certainly been proven wrong by recent history.

Furthermore, many REITs contain commercial real estate, office buildings, etc. On the surface this sounds great (diversification!) but I would certainly not want to put my money there (even before COVID-19 the world was moving towards more online shopping and work-from-home; the pandemic has of course amplified that considerably). I also don't want my money put in dead-end regions that are struggling economically (e.g. Alberta) or ridiculously overvalued (e.g. Vancouver). So yes I thought about it, but decided REITs are not for me. Again, they are decent investments for people who want exposure to real estate but don't have the time, temperament, and/or knowledge to get into RE investing, but I disagree with you that it is a better investment for sure.
Jr. Member
Dec 1, 2013
146 posts
51 upvotes
Ottawa
Looks like city council is voting on the planning committees approval of 386 homes in Barrhaven. Curious to see what this does for demand.
[OP]
Deal Addict
Nov 26, 2004
2706 posts
923 upvotes
Tadalafil wrote: As someone who grew up in Farrhaven, it is surreal to see Ottawa's burbs being compared to something like Tesla lol.
Nothing against Barrhaven or the burbs, but I am sure if you tell others 2 years ago, a TH in Barrhaven can sell for $600k by 2020, they would have gave you the same weird look as if you were to tell them Tesla's share will be trading for $2k per share.Smiling Face With Open Mouth
[OP]
Deal Addict
Nov 26, 2004
2706 posts
923 upvotes
FallThrough wrote: Looks like city council is voting on the planning committees approval of 386 homes in Barrhaven. Curious to see what this does for demand.
https://www.cbc.ca/news/canada/ottawa/t ... -1.5755444
What pops in the article is the following.:
Michelle Taggart, vice-president of planning and development for Tamarack, explained at the committee meeting that the company had to redesign its original plan for the subdivision to "raise everything up," after the city expressed "geotechnical" concerns about the depth of the pipes that would be installed underneath.
They are going to either lose money on the project or new townhomes in Barrhaven will soon start in mid to high $600ks to cover the additional construction costs.

At least a sump pump and AC will come as a standard feature from the builders.
Given the subdivision's location less than one kilometre from the landfill, houses will have warning notices on the property title that note those operations could cause odours, and the homes must have air conditioning units.
Deal Guru
User avatar
Jun 28, 2003
10198 posts
3285 upvotes
Ottawa
^ I remember there was a big brouhaha about Kanata/Stittsvillle homes being fairly close to the Carp Dump a few years ago but I guess in today's market, that is not a deal breaker anymore.

I would be more concerned about homes on busy (arterial) street. I honestly don't know how folks who live on Baseline, Parkdale, Island Park and Alta Vista drive manage traffic and parking on a daily basis. I guess they got used to it or develop some good routines.
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Deal Fanatic
Feb 22, 2011
8551 posts
10132 upvotes
Toronto
Cashforlife wrote: Blind spot you have is "risk-adjusted" return.



Keep going with that, because it's the right direction. You already have an appropriate amount of exposure to real estate just by owning the S&P500. The analogous argument to what you said above is that you should invest every dollar you have in Tesla, not the S&P500, because Tesla goes up more. That is what you are doing when you buy one house on one street in Barrhaven.



Unsustainable processes do not go on forever. Here is how US real estate performs as an asset class over long periods:

Image

Average annual return is around 0.4% per year. You could reasonably expect growth at the rate of inflation, not more.
It's extremely silly to take an average of an entire country. Some cities died and others boomed, they have wildly different returns and the total average is useless.
Deal Fanatic
Feb 22, 2011
8551 posts
10132 upvotes
Toronto
Cashforlife wrote: You seem to be saying that you have clairvoyance about which cities to invest in. I wish I had your confidence.
You don't need clairvoyance because it's not random or a free market, the government is actively and openly engaged in urbanization and densification. They aren't going to be building out infrastructure and amenities 100s of km in every direction of cities because they can't afford to. They also have openly stated immigration will be a large part of post COVID recovery. Places like Ottawa, Toronto, Vancouver and Montreal are not going to die.

You also don't need clairvoyance to know what happens when you increase money supply 15% in one year. That money isn't going to disappear when spent it keeps circulating and pushing up desirable asset prices. This is a historic increase in money supply.
Deal Fanatic
Feb 22, 2011
8551 posts
10132 upvotes
Toronto
Cashforlife wrote: No problem, buy a REIT that has properties in "major Canadian urban centres."
Sure, where can I get a $1 million loan at 1.55% to buy them?
Deal Addict
Jan 15, 2017
3611 posts
2966 upvotes
William W wrote: https://www.cbc.ca/news/canada/ottawa/t ... -1.5755444


They are going to either lose money on the project or new townhomes in Barrhaven will soon start in mid to high $600ks to cover the additional construction costs.

At least a sump pump and AC will come as a standard feature from the builders.
What's amazing to me is that people will buy them. Hardly seems like an ideal location to me to build but I am sure they will sell them all.
Deal Fanatic
Feb 22, 2011
8551 posts
10132 upvotes
Toronto
Cashforlife wrote: Fill your boots, as long as you understand the interest rate, finance renewal and idiosyncratic risks of buying one house on one street. Don't worry about buying a cash flow negative property.

(You are playing with fire.)
Maybe in the short term but not in the long term. In 25 years at the very least you have $1 million paid off. And let's be real prices will be much higher in 25 years.
[OP]
Deal Addict
Nov 26, 2004
2706 posts
923 upvotes
R8247 wrote: https://www.google.com/amp/s/www.cbc.ca/amp/1.5756516

Let's see what effects these measures will have on new listings, open houses and viewings ...
From a big picture perspective, we could be as close as 6 months away from a cure and a vaccine. As long as interest rates stays low, which they should and the government doesn't go into an austerity mode, which I have a difficult time seeing that happening with Trudeau/Freeland in charge, the next 28 days may be a good opportunity for owner occupants to get into the market if new listings doesn't plunge.
Deal Addict
Jul 7, 2007
1136 posts
715 upvotes
Cashforlife wrote: To buy a million dollar property, you have to have $200k down. If you invest $200k in the S&P500 today, you can reasonably expect compounded annual gains of about 7%. In 25 years, you will have $1 085 000 that is totally liquid, you can cash out in 15 seconds with a $10 transaction fee. With way, way less risk than buying real estate one on single street, in a city that goes down to -40 C in the winter and is run by insane councillors who support unlimited sprawl instead of developing land in the core.
Did anyone come in this thread to talk about personal finances or to talk about Ottawa RE?

Lol first you advocate to buy REITs, now you advocate for S&P500...

Both our tfsas and rrsps are entirely maxed out with s&p500 and nasdaq etfs. We’d be way behind investing in REIT etfs Face With Tears Of Joy. Same for our non registered accounts, I’d never consider adding REITs in there. Growth etfs all the way since we are 33 and 31. We also diversify by having crypto and gold. We’ll keep maxing out our registered accounts yearly and also add to our non-registered accounts. We’ll still continue to invest in Ottawa as well, already seen a 400k tax free gain on our property that we purchased in 2013, already up 150k (taxable boo) on a precon townhouse we bought in June 2019 and it already cash flow positive. Already up 100k (on paper) on our second townhouse bought in Feb 2020 and that will be cash flow positive when it’s rented.
Sr. Member
May 23, 2017
992 posts
745 upvotes
William W wrote: From a big picture perspective, we could be as close as 6 months away from a cure and a vaccine. As long as interest rates stays low, which they should and the government doesn't go into an austerity mode, which I have a difficult time seeing that happening with Trudeau/Freeland in charge, the next 28 days may be a good opportunity for owner occupants to get into the market if new listings doesn't plunge.
Definitely, hindsight is 20/20 of course but Mar/Apr represented a rare lull in the market that temporarily shifted to being more buyer-friendly for once. "Be greedy when others are fearful" indeed. I'm slightly upset that we didn't take advantage of that time to pick up another property (we were swamped with our hands full adjusting to life with a newborn at the time, so real estate took a backseat). Few months later after things settled down and we were ready to get back into investing, the market was a whole different story. We are also considering upsizing to a bigger house in the next couple of years but our recent attempt to pick up a precon ended in total failure thanks to the insane demand. I'm just glad we got our current house when we did!

No regrets on the kid obviously (lol) so overall wouldn't change a thing, but boy was that a missed opportunity! Hopefully other people, especially people looking for their first home, were able to capitalize on the (very brief) reversal in Ottawa's red-hot market. (Granted, it may have been difficult to pull the trigger because no one knew at the time what the pandemic would bring to the RE landscape.)

Unfortunately, while a repeat of that short cooldown would be welcome, I don't see nearly the same effect happening this time. Now it's "more of the same" and I expect buyers won't be as fearful this time around, with lots of eager buyers waiting in the wings. Hope I am proved wrong though! Would be nice for a bit of balance to return to the insanity of this market.
Deal Addict
Jan 15, 2017
3611 posts
2966 upvotes
R8247 wrote: https://www.google.com/amp/s/www.cbc.ca/amp/1.5756516

Let's see what effects these measures will have on new listings, open houses and viewings ...
It's going to be an interesting time. We are entering the season where Real Estate typically slows. Although, we are not in a typical market by any stretch. I am seeing more and more instances of listings set up for bid acceptance to only have these dates pass and the listing still up with references of the bid date removed. I am also seeing more examples of listings being re-listed after what appears to be failed bid listings. Of course, these are only examples of listings that I am noting and it may mean nothing overall.
Jr. Member
Sep 29, 2013
172 posts
94 upvotes
skeet50 wrote: It's going to be an interesting time. We are entering the season where Real Estate typically slows. Although, we are not in a typical market by any stretch. I am seeing more and more instances of listings set up for bid acceptance to only have these dates pass and the listing still up with references of the bid date removed. I am also seeing more examples of listings being re-listed after what appears to be failed bid listings. Of course, these are only examples of listings that I am noting and it may mean nothing overall.
I am noticing this a bit as well in the resale Barrhaven townhome market. Maybe its starting to soften.
Regarding construction during lockdown... some trades I have used this year said they never stopped working during the shutdown.
Jr. Member
Sep 29, 2013
172 posts
94 upvotes
Zero Hope wrote: Did anyone come in this thread to talk about personal finances or to talk about Ottawa RE?

Lol first you advocate to buy REITs, now you advocate for S&P500...

Both our tfsas and rrsps are entirely maxed out with s&p500 and nasdaq etfs. We’d be way behind investing in REIT etfs Face With Tears Of Joy. Same for our non registered accounts, I’d never consider adding REITs in there. Growth etfs all the way since we are 33 and 31. We also diversify by having crypto and gold. We’ll keep maxing out our registered accounts yearly and also add to our non-registered accounts. We’ll still continue to invest in Ottawa as well, already seen a 400k tax free gain on our property that we purchased in 2013, already up 150k (taxable boo) on a precon townhouse we bought in June 2019 and it already cash flow positive. Already up 100k (on paper) on our second townhouse bought in Feb 2020 and that will be cash flow positive when it’s rented.
Good for you. All thats left is to tell us what kind of car you drive young man. haha
Deal Guru
User avatar
Jun 28, 2003
10198 posts
3285 upvotes
Ottawa
jk9088 wrote: Definitely, hindsight is 20/20 of course but Mar/Apr represented a rare lull in the market that temporarily shifted to being more buyer-friendly for once. "Be greedy when others are fearful" indeed. I'm slightly upset that we didn't take advantage of that time to pick up another property (we were swamped with our hands full adjusting to life with a newborn at the time, so real estate took a backseat). Few months later after things settled down and we were ready to get back into investing, the market was a whole different story. We are also considering upsizing to a bigger house in the next couple of years but our recent attempt to pick up a precon ended in total failure thanks to the insane demand. I'm just glad we got our current house when we did!

No regrets on the kid obviously (lol) so overall wouldn't change a thing, but boy was that a missed opportunity! Hopefully other people, especially people looking for their first home, were able to capitalize on the (very brief) reversal in Ottawa's red-hot market. (Granted, it may have been difficult to pull the trigger because no one knew at the time what the pandemic would bring to the RE landscape.)

Unfortunately, while a repeat of that short cooldown would be welcome, I don't see nearly the same effect happening this time. Now it's "more of the same" and I expect buyers won't be as fearful this time around, with lots of eager buyers waiting in the wings. Hope I am proved wrong though! Would be nice for a bit of balance to return to the insanity of this market.
Congrats on the new bundle of joy, jk!

You are right, I don't see this second wave having the same impact as the first wave, in terms of market slowdown. I am not a medical expert and I don't want to turn this into a COVID thread but I have a feeling (and I am seeing with my own eyes) all the warnings from the different health authorities are falling on deaf ears.

People more or less stopped dead in their tracks back in March/April because they did not know what to expect. Once the stats started rolling in and the number of fatalities and people in the ICUs were not as high as predicted/expected, it was more or less business as usual, at least from a real estate perspective. It certainly doesn't help the administration of our biggest trading partner down south had a different take on this, shall we say, and I can respect that even though I don't agree with it.

All this to say, people may be *immune*, pun intended, to all the warnings and negative stories this time around and just carry on their business. We may see a slowdown in the real estate market but that is because of the general market condition (entering the Fall/Winter market, as skeet alluded to), sellers too aggressive with their asking price etc and not because of COVID, IMO.
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Sr. Member
May 23, 2017
992 posts
745 upvotes
Thanks canabiz! :)

And agree with all your points--my feelings exactly. COVID-19 just isn't as scary to people now compared to the first lockdown.

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