Ottawa

June saw Ottawa’s year-over-year house prices rise by 15 per cent and condo prices rise by 17 per cent, boasting the largest price increases in Canada as predicted by Engel & Völkers in its Spring 2019 forecast.

Market Overview

Ottawa strengthened its position as a seller's market, maintaining its status as one of Canada’s fastest-growing real estate ecosystems. June saw year-over-year house price gains of 15 per cent overall. The condo segment increased by an unprecedented gain of 17 per cent year-over-year in June. 24 Listings are priced at fair market value and 56 per cent are being sold over asking.

Overall, June inventory was 52 per cent lower year-over-year. Even as new inventory hit the market, prices continued to climb. Low inventory and high buyer demand are particularly prominent for properties priced up to $1.5 million. As restrictions lifted, high-end properties that had been sitting for years began selling. Properties with pristine finishings, upscale kitchens, wine cellars and inviting outdoor spaces are being sold over asking. Since 2018, the sales to active listings ratio has been under pressure with the number of active listings reducing year-over-year. The COVID-19 pandemic is further intensifying constraint on new inventory. Despite COVID-19, this market is holding its position as one of the most attractive for investment by virtue of its stability and healthy economic environment. Ottawa is uniquely positioned on the job front due to its high volume of direct employment in the public sector, tech, healthcare and education. The unemployment rate in Ottawa-Gatineau increased from less than five per cent in early 2020 to just over seven per cent in May. 26 This low

unemployment rate amidst the pandemic is a key factor providing economic security in the area. Its healthy rental market, driven by academics, diplomats and politicos looking for leases in executive properties, offers a cash-flow opportunity for investors, despite the borders being closed. With two universities and several community colleges, students are a further segment propping up the rental market.

Through Q2, real estate quickly rebounded from the impacts of COVID-19 as the market continued to favour sellers with strong demand, low inventory and price increases, despite drops in home sales.

24 Ottawa Real Estate Board, June 2020 25 Ottawa Real Estate Board, June 2020 26 Statistics Canada, May 2020

608 Byron Avenue

Engel & Völkers Ottawa Central

An In-Depth Look

The most in-demand luxury destination for properties over $4 million continues to be Rockcliffe Park, only seven minutes from Parliament Hill, home to Canada’s federal government. New construction is increasingly common in this area as it sees purchasers build new custom mega-properties on the land. For homes priced over $1 million, the prime luxury neighbourhoods are in The Glebe, and the west end, including Westboro and McKellar Park.

Stittsville remains the prime neighbourhood for new homes under $1 million with several new housing developments. In addition, Mechanicsville, Hintonburg and Wellington West are popular with a stylish selection of new infill inventory appealing to a variety of buyers who are drawn to neighbourhoods with strong walkability scores and a collected selection of shops and restaurants. Engel & Völkers Ottawa Central reports regular multiple offer situations. Prior to COVID-19, it was common for quality inventory to receive up to 18 offers. As buyers became accustomed to virtual showings, properties continued receiving eight to 10 offers on average throughout the lockdown. Multiple offer situations grew in June with listings sold over asking increasing from 43 per cent in May to 56 per cent.

In April, the pandemic’s impact triggered a year-over-year decrease in residential home sales by 55 per cent. 27

Mid-May saw a stark improvement from April. Monthly unit sales ticked up 11 per cent from April’s figures, but were down by 44 per cent compared to last year. At the close of May, residential property sales decreased by 43 per cent year-over-year, but average prices for residential units rose by 13.8 per cent compared to last year. 28

This data represents totals and averages from April - June 2020

27 Ottawa Real Estate Board, April 2020 28 Ottawa Real Estate Board, May 2020

From August 2019 to February 2020, home prices increased at an annual rate of 31.8 per cent, tripling the amount compared to six months prior. 29

June saw recovery back to normal levels with a mild two per cent drop in unit sales year-over-year, a drastic improvement from the 55 per cent drop in April and 44 per cent drop in May. Residential homes sales in June rose one per cent year-over-year while condominiums sales decreased by 12 per cent year-over-year. Average sale prices increased in June as condominiums were up 17 per cent and residential-class properties increased by 15 per cent compared to last year despite the reduced number of sales. 30

In June, listings sold over asking increased to

56%

Unit sales decreased most for homes priced below $650,000 and condos below $350,000. The category still moved inventory through Q2, albeit at a slower pace, reflecting its reduced inventory levels. The luxury segment above $1 million was the least affected, seeing price increases and buyer competition around the offer table. For properties under $1 million, homes sat for less than 60 days while it took less than 90 days for a mid-priced home between $1-1.5 million to sell. Typically, high-end

29 “Housing Affordability in Ottawa Has Deteriorated 'Markedly'.” Greater Ottawa Home Builders Association, 5 May 2020, www.gohba.ca/housing-affordability/. 30 Ottawa Real Estate Board, June 2020 property sales in the $4 million plus category peak at three to five transactions per year.

Surprisingly, deals closed on four luxury homes above $3 million before the end of May, boosting confidence in the affluent market. From January to June 2020, 12 total sales closed above $2 million, a 33 per cent increase during the same time period the year before when nine sales closed above $2 million. The market also saw more international interest within the luxury segment where locals are usually the predominant buyers.

Engel & Völkers Ottawa Central is seeing an emerging trend of buyers seeking properties in the suburbs, such as Greely and Manotick with social distancing measures shifting consumer preferences in favour of greater land and space. These larger properties offer an attractive lifestyle particularly as future travel may be restricted.

High-end inventory that was sitting prior to COVID-19 is now selling in locales such as Rideau Forest. More buyers are also looking to purchase secondary homes and recreational properties for leisure in lieu of travelling abroad. Housing in Ottawa’s core neighbourhoods is becoming unattainable due to popularity and high prices, pushing buyers to look to areas around the city’s downtown core. This demand surge as a result of COVID-19 poses an advantageous selling opportunity for people to cash out and invest in diversifying their real estate portfolios or leveling up their existing homes through renovations.

For luxury properties, millennials have emerged as a major buyer group. Peak millennials are prioritizing their spending on housing. This cohort is defining luxury differently than their parents’ generation. They are foregoing larger properties and are making smarter use of smaller spaces filled with high-end amenities and furnishings. The market has seen many moves to the city’s west end where new developments are emerging. A popular home buyer group is young professionals living in Ottawa occupying positions at major tech companies and startups.

With savings accumulated for people who remained employed during COVID-19, Engel & Völkers Ottawa Central believes more buyers may look into purchasing rental property as a second source of income. The strong rental market is largely driven by two universities and

community colleges with large student populations, foreign delegates and politicos who require housing while posted and working in Ottawa. Engel & Völkers Ottawa Central reported a June increase of 40 per cent in closed sales volume year-to-date and 45 per cent in average sold price. Fourteen deals over $1 million were closed at the end of June 2020.

This is helping to drive a consistent flow of renters into the core. As part of the city’s prime job market, this will continue to be a main driver for the rental property segment. Overall, the market will continue its momentum as a growing place for stable investment in real estate.

“ The category that has been influenced most by COVID-19 is home unit sales under $650,000. This is where you see significant changes in the number of units that have exchanged hands in the residential section. For properties between $350,000 up to $1 million, you still see price increases and a lot of buyer competition. ”

Nancy O’Dea, Private Office Advisor, Engel & Völkers Ottawa Central

Q3 Outlook

Moving forward, Ottawa will continue to see the pent-up demand that has persisted over the past year due to the market’s lack of inventory. Recovery from COVID-19 has already begun as seen with the rebound in May and June home sales with price inclines across all properties, and the city remains a stable market to invest in due to its steady economic flow. The usually busy spring market has shifted to the summer with heated market conditions and

growing international interest in luxury neighbourhoods like Rockcliffe Park.

Up-and-coming places to watch include Ottawa South, Alta Vista, and Almonte. Particularly, Almonte is a growing destination for first-time buyers and retirees who are attracted to several new and affordable housing developments, as well as the charm of the village with its boutique shops, arts and food scene.

As a capital and government city, Ottawa stands out within major metropolitan areas for its resiliency. As the seat of Canada’s federal government, pandemic-related job loss in Ottawa is not likely. Before COVID-19, job growth was at an all-time high, particularly for government and tech industries. This has insulated the local economy, placing it in a unique position among the major markets. 31

This data represents totals and averages from April - June 2020

Compared to May 2019, average prices for residential units in May 2020 increased

13.8%

31 “REIN Report: Canada's Major Housing Markets Are Slumping-Except One.” The Real Estate Insider REIN Report Canada's Major Housing Markets Are Slumping Except One Comments, blog.reincanada.com/canadas-major-housing-markets-are-slumping-except-one/.