Andy Brethour: Ottawa’s new home market was good in 2016 but it will be even better in 2017
Ottawa Construction News staff writer
Last year was a good year for Ottawa’s housing market and 2017 will be even better, says Andy Brethour, president of the PMA Brethour Realty Group.
Speaking to the annual Greater Ottawa Home Builders’ Association (GOHBA) Sales and Marketing Hello Goodbye meeting on Jan. 24, Brethour said Ottawa’s housing market – influenced by civil service job security – has always been among Canada’s most stable, and that relative stability continued last year. Even when things go wrong here (such as when the previous Conservative government imposed a civil service hiring freeze in 2011) they don’t collapse.
However, there have been healthy civil service changes with Liberal government and high-tech hiring, resulting in increased demand and likely further growth in 2017. Nevertheless, this improvement won’t be extreme.
There is one slow spot: Condos – in part because while there are pressures on land supply in Ottawa, they are nowhere nearly as severe as in Toronto and Vancouver, where the condo market continues to boom.
“The condo market sucks in Ottawa,” he said. “Part of this is value driven, and explains why in Vancouver they have 16,000 condo units and you (in Ottawa) are doing 600.”
“Part of the reason is he underlying land value,” he said.
Vancouver has geographical constrictions on land supply; the problem in the GTA is more political.
“A 20-foot front townhouse lot in Markham, the same as one in Kanata, (has) sold for $30,000 a front foot or $600,000 for the lot,” Brethour said. That results in the need for properties to sell for $1 million to $1.2 million, compared to Ottawa prices, where lots of the same size can be purchased for $3,500 per front foot.
The shortage of available land is so great that there are only 2,200 vacant units available in the GTA, when the annual demand would be for 40,000 – and a truly balanced market should have about a year’s supply of available units.
Ottawa also has not yet experienced the strong pull from new immigrants, who are driving up demand in Canada’s larger cities. “Out of the 250,000 – now 350,000 – (immigrants) coming to Canada, 7,500 come to Ottawa compared to 100,000 in Toronto,” he said.
The fact that the general income level is relatively high in Ottawa and prices are reasonably low results in an “exceptionally good value price point.”
With increased immigration, there should be “much higher market demand next year.”
Overall, Brethour predicts there will be a 10 per cent increase in residential projects, to 4,2000 units from 3,804 in 2016, a 10 per cent increase. (Sales increased 19.1 per cent in 2016 from 2015.)
Condo sales slumped last year to 621 (a 24.8 per cent decline from 2015) and Brethour predicts only a slight increase to 655 units.
One unique feature of Ottawa’s market is the high percentage of townhouse purchases, split almost evenly at 41 per cent each. There were 14 per cent condo apartment sales and almost no condo tower sales.
Sales grew in all areas but the central area in 2016 from 2015, which saw market share decline from 17 per cent to 12 per cent. In 2016, the west reported 37 per cent of the new home sales, the south had 30 per cent and the east reported 21 per cent of the total sales.
“You need to rejoice in the stability of Ottawa,” he said. “(The market) is moving up just nicely – the cornerstone is job growth. You had a terrific year and you are going to have a better one in 2017.”