Ottawa’s west end is on fire. According to mortgage broker, Susanna Penning of Verico Mortgage Advisors, Barrhaven and Kanata are being driven by corporate migration—and, in particular, the high tech sector—and their well-heeled workers.
However, supply is also critically low and bidding wars are commonplace—and in many cases, unconditional offers are tendered. In the near-term, Penning expects a robust market that will be largely impervious to new market realities like B-20 and rising interest rates.
“Ottawa has always had a good base of well-compensated applicants, so I haven’t come across the stress test in a lot of cases derailing clients’ plans,” said Penning. “It’s certainly squeezing out the bottom end of purchasers, primarily first-time homebuyers who have a lot of debt load, but the average upsizer isn’t butting against it.”
In addition to tech sector workers, Penning counts police offers, firefighters and government workers among her clients, but concedes to seeing a plethora of first-time buyers bogged down by student loans and credit card debt.
Ottawa’s west end is poaching activity from the city’s east—even the RCMP and National Defence Department have moved into the area—and housing goes for as much as $25,000 over asking. Penning ensures clients are aware of the risks associated with tendering unconditional offers, but admits it’s a risky proposition.
“One of risks of going in without a no-financing clause is if the lender requires an appraiser, and the appraisal is different than the price paid,” she said. “Somebody could get caught up in a bidding war and pay $30,000 over asking, and then if the lender wants an appraiser and finds the home isn’t worth what was paid for it, the client is left scrambling.”
Whether or not price points escalate to such heights that affluent buyers begin brushing up against the inconvenient realities of the 2018 housing market remains to be seen. Penning says clients have started paying attention to debt levels and are beginning to taper their expectations, however, she doesn’t expect the west end to cool any time soon.
“With respect to (the stress test, interest rate hike, and escalating housing prices) in combination, I think clients are slowly coming around to the fact that this will be the new normal and they’re going to have to temper their expectations. It’s been a little bit of a free-for-all with low interest rates for a while, so now it’s time to take on a more conservative approach, and all three aspects are contributing to people becoming more realistic with price points and how much they want to be financed.”
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