Tightening federal mortgage rules won't deter first-time homebuyers from purchasing new condos and keeping Ottawa's housing market afloat in the coming years, an analyst with Canada's housing agency said Thursday.
Abdul Kargbo of the Canada Mortgage and Housing Corp. said an increasing number of traditional first-time buyers in the 25-34 age group are moving into the Ottawa area, helping drive up demand. The amount of money they’re making is also on the rise, so more of them have the money to move from renting to owning.
However their average income of $79,800 means many of them will only be able to afford lower-priced homes, Mr. Kargbo said, contributing to a change in the types of condos on offer.
“We will see a shift from higher-priced condos into less expensive condos,” said Mr. Kargbo. “This will be driven by first-time home buyers.”
Builders have already sprung up to meet this demand. Windmill Development Group is marketing condos inside its planned 57-unit building on Wellington Street in Hintonburg this fall. Part of the pitch includes offering condos at lower price points than their other projects to encourage renters to purchase their first home.
The number of condominiums starts in the Ottawa region is expected to soar in 2012 to 2,350, according to CMHC numbers, but that will fall in 2013 to a forecasted 1,400 - a drop of about 40 per cent.
Mr. Kargbo believes there is still good reason to build, though.
He pointed to a steady decline in the number of completed condos during the past few years as an example. A total of 948 condos were completed in 2012, below the average from 2006 to 2011 of 1,094.
The demand for condos will play a major part in turning around an expected slowdown the CMHC is forecasting for the region in the first part of 2013, he said. The CMHC said this week it believes the number of housing starts in the area will fall from an 6,400 in 2012 to 5,400 next year.
The forecasted rise in demand for condos comes on the heels of the latest round of changes the federal government has made to make mortgages less available to people who want to buy homes they can’t afford.
The most recent change was in June of this year, when Finance Minister Jim Flaherty shortened the maximum term of insured mortgages from 30 years to 25.
Mr. Kargbo said the changes will sideline some would-be first-time home buyers, but doesn’t think it will significantly slow down demand in Ottawa.