“I don’t think we’ll see it heat up – we’re seeing that the prices of condos have gone down five to 10 per cent,” Sam Himyary, broker and certified financial planner with Mortgage Brokers Ottawa told MortgageBrokerNews.ca. “I think it will stabilize, and if not, go down for a bit; it won’t be gloomy but it’s not going to heat up.”
According to Sandra Perez Torres, senior market analyst for CMHC, Ottawa’s condo market is expected to experience a surge as fence sitting buyers take advantage of low rates and a market that has been cooling since late 2013.
“That's what a lot of people like to call a soft landing -- that's what we are seeing in Ottawa," Perez Torres told the Ottawa Sun. "We are seeing a soft landing where incomes continue growing and prices will grow at a lesser rate. That implies that Ottawa is more affordable."
Ottawa is expected to see 5,020 housing starts in 2014, a significant drop from 2013’s 6,560. Single-detached homes are expected to account for only 33 per cent of those and sales are expected to drop from 14,049 in 2013 to 13,750 in 2014.
But the evidence is in the rental market, according to Himyary, where the average rent is forecasted to hold relatively steady at $1,140 for two bedroom units (up from $1,132 in 2013).
“Most condo buyers purchase them for investment purposes. For example if you buy a $300,000 condo with 20 per cent down, after the condo fees and taxes, the rent will barely cover your mortgage,” Himyary said. “Any future increase in interest rates will make it even more unfavourable as an investment.”
Still, some argue first-time buyers may be drawn to the condo market in Canada’s capital city. Another point Himyary disagrees with.
“There isn’t a huge demand in Ottawa for 700 square foot condos, as an example,” he said. “We are a government town, not a business town. Most people who work downtown in the core of the city live in the suburbs.”
One leading Ottawa broker isn’t convinced the city's condo market will heat up, despite optimistic reports from the Canada Mortgage and Housing Corporation.