Throughout 2020, the global pandemic known as COVID-19 has swept across the world and impacted everything from healthcare to real estate. In 2019, the housing market in Canada was exceptional, and Ottawa was one of the most prosperous. Then 2020 came along; things have changed. As you may expect, house sales have hit an all time low, with the Canadian Real Estate Association (CREA) saying that the sales in May 2020 were the lowest they’ve been since May 1996!
But its more than just sales that have been affected by the pandemic. Housing construction has come to a grinding halt because of the percentage of laborers who are temporarily unemployed or working from home. While some houses on the market are still being sold, the impact of COVID-19 on the Ottawa real estate market is far-reaching.
If you plan on buying or selling any time soon, there are some things you need to keep in mind. Let’s have a look.
Ottawa is a Seller’s Market
There are many similar stories happening right now. Someone puts a house up for sale before the global crisis, and it would have sold swiftly had the pandemic not spread like wildfire. Instead, even houses that would have been grabbed up, such as a large bungalow for around $770,000, are now sitting cold for months. Instead of getting 30 offers, some sellers are only getting 10.
That doesn’t mean Ottawa is no longer a seller’s market. When looking at the Sales-to-New Listing Ratio (SNLR), May 2020 had an SNLR of 81 percent. In 2019, it was 75 percent. Even through the slowdown brought on by the coronavirus, Ottawa has continued ranking second nationally in terms of market competitiveness. Sales are down by 44 percent; new listings have declined by 49 percent throughout the year.
The Ottawa Real Estate Board stated that, in June 2020, 1,345 houses were sold in May. However, that is much better than the 55 percent drop recorded in April, when a mere 913 homes were sold.
In other words, if you are looking to purchase a home, you have fewer options and may have to pay a higher price. For those selling, you probably won’t get as many offers as you would like, but, with the overall increase of housing prices, you could get more for your home in the long run.
Real Estate Slump
In May, a study was released by the Real Estate Investment Network that predicted how Ottawa would have been one of the top five real estate markets in Canada to avoid a slump during 2020. The study analyzed markets of other competing areas, including Calgary, Edmonton, Toronto, and Vancouver by looking at GDP, population, job growth, and more.
The other locations were seeing dramatic downturns, but Ottawa was more resilient. The takeaway from the study is that there is a light at the end of the tunnel for those seeking to buy and sell houses in Ottawa.
You could say that, because Ottawa has been such a hotspot for growth these past couple of years, that it will rebound rapidly once COVID-19 is under control. Even during the first half of 2020, Ottawa continued to be one of the few urban zones in Ontario to have a favorable Home-Price-to-Median-Income ratio. This means Ottawa is one of the few places in Canada where a buyer could expect to pay off their new home in half the time someone from Toronto-Niagara would.
A Cautionary Note
Whether you are hoping to buy or sell a home in or around Ottawa, there is one thing you need to keep in mind: the real estate slump mentioned earlier. During 2019, prices were at an all-time high, and houses were trading hands rapidly. People were purchasing multiple properties as an investment into their future. Unfortunately, it seems that the market is not going to survive the downturn created by the coronavirus.
At the end of June, the Canada Mortgage and Housing Corporation (CMHC) discussed the likelihood of there being a sudden price drop at the beginning of 2021. While they anticipate prices rising again in 2022, next year’s market is going to be a little cheaper for the buyer. According to CMHC, housing sales will “trend lower throughout 2020…because of uncertainty surrounding the COVID-19 pandemic and the high level of inventory under construction.”
Still, the decline will not be too dramatic. The Housing Market Outlook from CMHC noted that local property prices are going to average around $451,500 to $481,000 throughout 2020. The anticipated drop in 2021 will bring that average range between $406,000 and $460,000. Buyers can rejoice. Those looking to sell immediately in 2021? Not so much.
So be cautious and weigh your options.
Snapshot of the Present
Let’s sum up this report with some numbers! According to a report from Ottawa Real Estate Board Members, the current market, as of July, shows 1,441 residential properties were sold in June 2020, bringing sales down 6.4 percent from May. Of that amount, freehold house sales amounted to 1,041 (a 4.4 percent decline). 400 were condominiums—an 11.1 percent decrease.
However, in June, houses on the market took a mere 16 days to sell. Last year, it took around 23 days to sell. Condominiums, too, are being bought up more quickly. This year, it takes 22 days to sell a condo, while last year it took around 40 days.
Last month, the average price for residential properties—including houses and condos—was $558.533, which is a 15.7 percent increase from 2019.
In Ottawa, the average price for a house increased by 14.3 percent, bringing it to $632,075. Meanwhile, the cost of condominiums rose by 17.6 percent (averaging around $367,137.
In short, the market we saw in 2019 has only gotten more competitive between buyers. With fewer houses on the market, sellers can get more for their properties and wait less for the right buyer to come along. In many cases, houses and condominiums are being sold over the original asking price.
If you are looking to sell or purchase a home or condo during the COVID-19 pandemic, you are going to need a realtor more than ever. Start looking for the right group today and get into your new home sooner.