With towers popping up across the city, is the condominium bubble about to burst in Ottawa?
The answer at a recent real estate conference was “no.”
At the Hampton Inn in Overbrook on Nov. 8, a couple of hundred local real estate professionals responded with confused murmurs when a senior Canada Mortgage and Housing Corporation market analyst asked if there are too many condos being built in the city.
“The answer is no,” continued Abdul Kargbo of the CMHC.
While the supply of condo units for sale has been rising since 2001, the percentage of unsold units has remained flat, Kargbo said, indicating that so far, demand is keeping up with condo construction.
Despite heated neighbourhood battles over new condo proposals, the number of buildings under construction is actually going down – and that’s a good thing for the market, Kargbo said.
Recently, 2010 was a bumper year for condo construction, with 1,397 units completed. That declined slightly to 1,324 in 2011, and with 948 units completed as of September this year, the numbers are on track for the downward trend to continue.
“The growth rate is not going to be as brisk as we’ve seen in the last few years,” Kargbo said, particularly when it comes to prices.
It’s overwhelmingly the 25 to 34 age group that’s driving the demand for condos, he said, because condos or townhomes are the only type of housing many of them can afford as first-time homebuyers. Newcomers to Ottawa usually number around 6,000 a year, and they also drive demand, said Sandra Pérez Torres, another senior market analyst. Migration to the city is expected to peak in 2013, with around 9,000 people expected to move here, she said.
Ottawa’s economy will remain relatively strong, despite layoffs in the city’s largest employment sector: the federal public service.
“However, uncertainty will keep some potential homebuyers on the sidelines in 2013,” Pérez Torres said.
In the past couple of years, condo sales comprised 22 per cent of the city’s real estate market. That will go up slightly to the 2010 level of 24 per cent next year, Kargbo predicted.
Still, many new condo units are expensive, so first-time homebuyers have been looking towards condo resales when they’re buying their first property. That demand for lower-priced condos will drive a shift towards fewer high-end buildings and more reasonably priced units, especially downtown and in the west and southeast ends of the city, Kargbo said. Townhomes are becoming increasingly popular in the east as younger people looking to buy property search for something in their price range.
They likely won’t find it in Barrhaven, Kargbo said, because the area’s popularity with families seeking their first home has driven up prices. Kanata, Stittsville and Orléans will also have a slower recovery, as inflated prices stifle demand there.
Construction of multi-unit housing such as rowhouses and condos will see a boost in Nepean and Gloucester, Kargbo predicted.
The rental market will continue to remain tight as investors express little interest in building or buying rental buildings and units. Prices and demand have been high since 2008 and with only 400 new rental units completed in the past year, rents will remain high, Pérez Torres said.
“That brought a bit of fresh air to the market, but it’s still quite tight,” she said.
As the population continues to age, housing for seniors will be another growing real estate market, Pérez Torres said. That type of housing already grew by 80 per cent in Ottawa in the past two years and is set to continue that trend.