Key Takeaway: the current workings of The Law of Supply and Demand in Ottawa from the eyes of an Ottawa Real Estate Agent.
In Ottawa, this years' increase in price across all property types has been like no other we've seen in recent years. We used to hear stories about bidding wars and unconditional offers in Vancouver and Toronto, however, in Ottawa that would only happen if the agent had done impeccable marketing around a listing, if the home was underpriced or if a listing was aggressively priced and advertised as part of the listing strategy (something we'll do to net our client more when we know an area has lots of demand).
The main reason for these increased prices goes back to decreased inventory. Trailing back since 2015, the Ottawa market has seen double digit decreases in housing inventory and understanding how this can impact your home buying process is crucial in order to have a successful and 'happy home purchase'!
Truth is, there is no more land in this Earth than what we already know of and its not going anywhere (although some would disagree and we do see beaches shrinking...). Homes are also fixed and if we have an increase in demand in a special area (be it due to immigration, a great school, people relocating to Ottawa for jobs, seniors downsizing, families outgrowing their small condos or townhomes, etc.), prices will naturally rise because the demand is higher than the supply. Imagine we have 15 families looking to live in Kanata Lakes (I can bet anything that the number is in fact higher in this area!) yet we only have 3 houses for sale; it is very likely that those 3 homes will sell for more money and quicker than if there were a surplus of inventory.
Now imagine the opposite, if we had 3 families looking to buy and 15 houses for sale. Prices in this case would fall because the supply is greater than the demand and now homesellers need to adjust pricing in order to remain competitive.
Why the shortage?
There's many factors affecting this, however, the main influencer is usually our economy. Low unemployment and a strong economy encourage buyers to get in the housing market and raise the demand, coupled with historically low interest rates.
We many times forget that sellers also need to buy (in most cases), so sellers hold off on selling as they'll too experience a hard time looking for their replacement home. That uncertainty further lowers supply and the increasing trend in home values has some sellers thinking, "maybe we should sell next year."
We've discussed this with many Baby boomer clients of ours and the truth is, many are reluctant to sell, for various reasons. Some are just not ready to give up their lifestyle and say goodbye to a neighbourhood where they have invested so many years and where there have so many memories.
Will this change?
The real estate curve of almost any city shows that history always repeats itself. We have periods of growth and periods of corrections (and recessions).
No one really knows when things will change. We had a strong condo buyer's market for the longest time a few years ago, this year condo sales have doubled year over year. It's hard to tell but with mortgage rules changing, it is a possibility.
What should buyers do?
Buyers should have a clear understanding of what their true needs are, and have a list of both needs and wants. We guide our clients through this process to make sure they are focusing on items that are important and non-negotiable and with the rest, we put them in a separate list and keep them in mind when looking too. For example: an in law suite. Rather than looking only for homes with ready-built income suites we make sure we look at homes that have the option or where the design lends itself to adding a side entrance or where the lot sits on the right zoning and size to add a coach house in the rear yard. Our team will help you create that property that you were envisioning.
We work together with Giovanna, our team's designer who is available for free consultations, exclusively to our buyers and sellers.
We embrace these challenges daily. Send any questions you might have our way by emailing us here or for a quicker reply text 613.262.8988