Ottawa’s housing market is expected to weaken over the next two years, according to a new report by the Conference Board of Canada, with declines expected in sales of both new and existing homes.
By Jacob Serebrin
Sales of existing homes are expected to drop 5.2 per cent to 17,363 this year before declining another 4.1 per cent to 16,649 in 2014, according to the Autumn Metropolitan Housing Outlook, commissioned by Genworth Canada, the country’s largest private residential mortgage insurer.
The resale housing market in Ottawa has been declining since 2009, when 19,300 units were sold.
“Although interest rates were very low during this time, buyers were discouraged, in part, by robust price growth,” according to the report.
Between 2000 and 2010 prices for existing houses increased an average of 7.1 per cent per year. According to the report, this increase in prices motivated sellers, which pushed the sales-to-new-listings ratio down from 65 per cent in 2009 to 51 per cent last year.
While resale prices have begun increasing at a slower rate, government cutbacks have weakened the region’s economy, which has slowed demand.
“Given the persistent weakness in the economy in 2013, reduced employment, the introduction of tighter mortgage rules last year, and rising interest rates, demand is expected to remain muted through the last half of this year and into next year as well,” the report said.
Resale prices are expected to continue increasing over the next two years but at a slower pace.
The report predicts that the average resale price will increase from an estimated $333,746 this year to $346,665 in 2015.
The report does predict that sales of existing homes will begin increasing again in 2015 and continue to grow an average of 1.9 per cent through 2017.
Ottawa’s new home market is also expected to see declines, according to the report.
With absorptions forecast to fall this year – to 7,039 from 8,097 last year, a 13.1 per cent decline – housing starts are expected to decline over the second half of this year and into 2014.
Despite an increase in housing starts during the first half of 2013, the report predicted that overall starts will be down 20.7 per cent for the year.
“With tighter mortgage rules, slowing population growth, and expected increases in interest rates in the coming months, demand is forecast to remain on a downward trend,” according to the report.
Starts are expected to decline by 11.5 per cent in 2014, pushing the number of starts below 7,000 for the first time since 1999.