Ottawa Housing Market Values Rise, Ownership Rates Fall

Affordability has played a sizeable role in the decline in ownership levels in the Ottawa housing market, despite strong population growth that has pushed Ottawa’s population up over the one-million mark. Average price of a residential property in Ottawa has climbed more than 150 per cent between 2006 and 2021, according to the Ottawa Real Estate Board. While values appreciated, Ottawa-Gatineau home ownership levels for the same period show a gradual contraction from a peak of 68.2 per cent in 2011 to 65.4 per cent in 2021, according to StatCan Census Data.

Demand for homes priced between $400,000 and $600,000 remains strong, but supply has been limited in recent years. The chronic shortage of entry-level freehold product at affordable price points has impacted young buyers in the government and tech sectors. Condominiums, while affordable, typically end up costing more when condominium association fees are factored into the equation. The stress test, which proved somewhat beneficial during the pandemic years, is now preventing many first-time buyers from getting into the market, leaving many to question if adjustments are needed to ensure its relevance.

Some buyers fresh out of college now prefer to rent rather than own, giving them the freedom to move. Rent controls have also given tenants greater stability in buildings older than November 2019 where annual rate hikes are limited.  The rental market has seen an uptick as a result, as young would-be purchasers put their home ownership aspirations on hold. Although rental rates have softened somewhat in recent months, they are still more expensive than historical levels, making it harder for aspiring buyers to save for a downpayment.

The increase has fueled suburban sprawl, although zoning regulations, development costs and bureaucracy are impacting new housing starts. By providing greater incentives to builders, especially those focused on entry-levels housing, municipalities can help offset high construction and labour costs. Removing the so-called red tape from the process by expediting approvals for affordable housing at a municipal level and providing construction subsidies on entry-level product at a provincial level or federal level would go a long way in toward meeting pent-up demand.

Political uncertainty has clouded the outlook for the Ottawa housing market to some extent this year, with the outcome of the Liberal leadership race and potential for an upcoming election creating some concern amongst public service employees. Pent-up demand continues to exist throughout the city, although fixed mortgage rates would need to fall further to force Ottawa buyers off the fence and into the market.  At present, Ottawa-Gatineau home-ownership levels remain in line with the national average.