The average price of a property in Ottawa decreased by 16% between March and August 2022, from $757,230 to $635,585. This is a 4.7% increase over the average selling price in August 2021 of $606,943.
The average selling price in August 2022 decreased 1.6% compared to the average selling price of $645,650 in July 2022. This reduction is less severe than the decreases of 4% in June and 6.5% in July of 2022. The number of house sales has decreased compared to the prior year. There were 1,137 real estate transactions in August 2022, a 28% decline from August 2021. Moreover, year-to-date sales of 11,817 units represent a decrease of 19.6% compared to year-to-date sales of 14,706. A typical single-family house in Ottawa costs $707,712. This is 1.2% less than the July 2022 price of $716,354 However, between August 2021 and August 2022, there is a 5% rise. August 2022 saw the sale of 850 single-family houses, up 0.1% from the 840 units sold in July 2022 but down 27.6% from August 2021. The average condo price in July 2021 was $421,966, a 0.8% reduction from July 2022’s $425,696. This price represents a 3.6% annual increase. August 2022 saw sales of 287 units. This is an increase of 6.2% over the 270 condominiums sold in July but a decrease of 28.0% from August 2021.
Condominiums currently have 2.2 months of inventory and single-family houses have 3 months, which are both considerable increases from the end of March, when inventory was just a half month. Despite a 16% increase in average prices over the last two years, Ottawa’s home prices continue to be far cheaper than those in Vancouver, Toronto, and even Hamilton. The great majority of Ottawa residences cost less than $1 million. As a result, they may still be eligible for a five-to ten-percent down payment with CMHC insurance, enabling a much bigger pool of purchasers to compete for limited inventory. However, the real estate market in Ottawa is far more costly than in Montreal or Calgary. The real estate market in Ottawa is far more expensive than in Edmonton and Winnipeg.
The current annual rate of inflation, at 7.6%, is far higher than the desired rate of 2%. This objective was established in a 1991 agreement between the Bank of Canada (BoC) and the Minister of Finance. In the following months, the Bank of Canada will continue to raise its policy rate while reducing its balance sheet. Quantitative tightening is how the Bank of Canada reduces its balance sheet. The Bank of Canada’s rate hikes will raise prime and variable mortgage rates, making it more expensive for mortgage borrowers to repay their loans and thus making it harder for them to qualify for a mortgage. On September 7, 2022, the Canadian policy rate went up by 0.75 percentage points, bringing it to 3.25%.
The rate of a fixed-rate mortgage is determined by adding a risk premium to the yield on government bonds. Inflation and, more recently, quantitative tightening has contributed to the increase in this rate during the last year. So, rising mortgage rates have made it harder for people to buy homes, which is now the biggest problem in the Canadian housing market.
The Canadian real estate business generally benefits from the nation’s stringent construction restrictions. Municipal construction limitations have substantially constrained the housing market’s adaptability. Consequently, any rise in housing demand may result in a disproportionately large increase in property values, as was the case in Ottawa and many other Canadian cities during the significant COVID Bull Run from March 2020 to March 2022. It seems that monetary policy has the most effect on the housing market. Price changes seem to be influenced by fluctuations in interest rates and money supply.