Ottawa Construction News staff writer
Ottawa’s housing market has gone through some truly rough times in the past couple of years – reaching a low point about this time in 2023 – but there are signs the worst may be over as builders adapt and innovate to changing conditions.
These observations reflect the observations of speakers at the Greater Ottawa Home Builders’ Association Hello Goodbye gathering on Jan. 25.
“The numbers may not be as bad as they seem, and there are some bright spots,” said Cheryl Rice, president of PMA Brethour Real Estate Group.
Overall, builders sold 2,571 homes in 2023, 45 per cent below the 10 year average of 4,690.
The 2023 numbers are a slight decline from the 2022 numbers of 2,776, which represented a “hard correction” from sales of 5,022 in 2021. (Ottawa’s new home sales market peaked in 2019 with 6315 recorded sales.)
Home sales were shockingly low in January, February and March, 2023 as rising interest rates and international tensions aggravated an already-jittery market. To put things in context, Rice showed a graph that reported 115 sales in January 2023, compared to 464 in January, 2022. And even that 2022 number was significantly below the five year average of 588 new home sales.
Beginning in April, PMA Brethour’s data indicates that conditions began improving – at least relative to 2022. The best month was in April, with 343 sales (compared to 280 the previous year and a five-year-average of 414 sales). Last December, usually a slow month for new home sales, builders report 140 sales, compared to 62 in December, 2022 and a five-year-average of 258.
PMA Brethour’s data indicates the inventory of available homes for sale has increased in Ottawa by 69% last year, from 1,243 to 2,101 (mostly concentrated in low-rise housing). In 2019, 2,543 homes were available.
Rice says the builders have adapted to higher interest rates and affordability issues by developing more “stacked townhouse” projects, with relatively affordable prices, as the resale market – which influences demand for new homes – reached a “balanced market” stage.
For resales, the Sales to New Listing Ratio peaked at 83% in 2020 – a true seller’s market. By 2022 this ratio had declined to 59% and last year it was relatively steady at 58%, indicating that there isn’t a frenzy of desperate purchasers (or sellers). In related data, the resale inventory continues to rise, increasing from 1,213 listing in 2021 to 1,865 in 2022 and 2,389 last year (a 28% increase).
Rice says key elements shaping the housing market in the year ahead include addressing the affordability challenge. She said builders have been resourceful in building homes that are less expensive, specifically townhomes, which in the last two years have comprised the majority of new home sales (at 53%). Condo townhomes, the least expensive option, came almost out of nowhere to grab 17% of the market in 2023, an increase of 15% from just 2% in 2022, Rice said.
Looking forward, Rice said rapid population growth caused by high immigration levels will create both challenges and opportunities.
Rice says she expects the market to improve this year, but it will be sluggish in the winter and spring.
“Recovery won’t happen until high interest rates start to subside,” she said. “Following the start of rate cuts in the spring, the market will improve as consumer confidence starts to recover.”
These developments will improve the market in the latter part of the year, with a “more fulsome recovery in 2025,” Rice said.
In another presentation, David Coletto, chair and chief executive officer of Abacus Data, provided some insights into the major trends and challenges affecting the overall economy and the housing industry.
Significantly, throughout Canada, the aging population is skyrocketing. Nationally, there’ll be 1.15 million more people aged 85 and older in 20 years.
Offsetting the rapid growth in older people, the government’s policies to spur immigration are creating record volumes of newcomers. “Over the course of the past two years, Canada’s population has grown by two million people,” he said.
The combination of older people wanting in many cases to stay in place at their homes plus immigration have resulted in a surge of housing prices nationally, and this has created a new situation where there is a sense of “scarcity” – meaning that an increasing number of people are feeling that the things (such as housing) that they need and want “are becoming harder to come by,” Coletto said.
There’s going to be “incredible pressure by political stakeholders” to build as many homes as they can – even if they can’t make a profit on their projects
Coletto says surveys indicate the biggest challenges that worry Canadians are the cost of living (82%), capacity and access to the healthcare system (64%) and homelessness and poverty (57%).
Surveys show that the public believes the most important perceived barrier to affordable housing is rising construction costs, at 58%. Other key issues include lack of supply (45%), the influx of new Canadians (40%), foreign buyers 35% and lack of political will (25%).
One survey question invites respondents to use a single word to describe the housing supply in their area. By far the biggest word used is “expensive”, while “high”, “bad”, “unaffordable” and “crazy” are also popular responses.
In terms of how the housing crisis affects Canadians, 41% says financial hardship is their major concern. Other negative impacts include: Quality of life (33%), mental health (31%), family dynamics (22%) and physical health (20%).
Notably, though zoning and building permit approval processes are defined at the local level, the survey respondents believe the federal government should take the lead in resolving the housing crisis.
The housing affordability issue touches to the heart of Canadian life decisions. Coletto said 40% of Canadians without children says the “housing crisis has impacted their decision to start or grow their family.”
In a somewhat paradoxical contrast to rapid immigration growth, about six million people “have or are considering leaving Canada altogether,” he said the surveys report. Meanwhile, four in 10 of the most financially insecure Canadians (about 1.8 million adults) “worry about becoming homeless.” Some 73 per cent believe the country’s immigration target is too high.
The immigration data reveals a some contradictory observations. On one hand, high immigration helps with “the availability of workers” to build new housing, but on the other side, the immigration influx has a serious impact on housing cost and availability.
Other speakers at the GOHBA event include Petula Pinto, business development manager at HomeEquity Bank, who discussed how reverse mortgages could help address the affordability problem while seniors wish to stay in place (with older homeowners pulling some of their equity to help fund their children’s’ new home purchases.)
Jennifer Alvarenga, broker at Goodstory, described how she has found opportunities as an immigrant from Central America and we can learn to capture our own potential.
