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No fall(ing) back in Ottawa's resale market

OTTAWA, October 5, 2016 - Members of the Ottawa Real Estate Board sold 1,371 residential properties in September through the Board’s Multiple Listing Service® System, compared with 1,241 in September 2015, an increase of 10.5 per cent. The five-year average for September sales is 1,171.

“Again this month, we have broken the record for residential and condominium units sold, with 200 more units sold than the five-year average for September sales,” says Shane Silva, President of the Ottawa Real Estate Board. “With average sale prices remaining virtually unchanged since the beginning of the year, this could be an indication that prices have adjusted to market expectations and sales have rebounded as a result.”
 
September’s sales included 269 in the condominium property class, and 1,102 in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, townhouse, etc.), which is registered as a condominium, as well as properties which are co-operatives, life leases, and timeshares. The residential property class includes all other residential properties.
 
“Units listed in both residential and condominium property classes continue to decline,” indicates Silva. “From 2,076 listed in September 2015 to 1,822 listed in September 2016 for residential properties, and from 637 listed in September 2015 to 588 listed in September 2016 for condominium sales. With fewer listings coming on to the market, combined with recent higher unit sales, overall inventory is declining. The basic economics of supply and demand at play will continue to have an impact on the Ottawa resale market.”
 
The average sale price of a residential-class property sold in September in the Ottawa area was $383,793 a decrease of 0.1 per cent over September 2015. The average sale price for a condominium-class property was $252,136, a decrease of two per cent over September 2015. The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold.
 
“The hottest segments in our market for September continue to be two-storey and bungalow residential homes in the $300,000 to $400,000 price range, followed by one-level and two-storey condos in the $200,000 to $300,000 and the $100,000 to $200,000 price range” says Silva. “In addition to residential and condominium sales, OREB Members have assisted clients with renting almost 2,500 properties since the beginning of the year.”

 

FOREIGN BUYER TAX IMPACTS VANCOUVER HOUSING MARKET

According to statistics from the Real Estate Board of Greater Vancouver—highlighted in a recent Globe and Mail article—year-over-year detached home sales in the Vancouver region have been declining at a quicker pace since the government implemented a new tax 15 per cent tax for foreign buyers. 

RE/MAX polled its Lower Mainland brokers in early August with the goal of finding out the early impact the new tax was having on their Sales Associates’ deals.

RE/MAX offices within Vancouver reported approximately five per cent of deals being affected by the foreign buyer tax, while outlying Lower Mainland offices were seeing closer to two per cent of deals affected.

“It’s a domino effect,” said Elton Ash, Regional Executive Vice President of RE/MAX of Western Canada. “Foreign buyers aren’t the only people being hit. Canadians who had contracts to sell and had already put offers on their next house are impacted as well. So although five per cent of deals may be affected, the domino effect could potentially grow that number much higher.”

Ash added that the majority of home sales affected appear to be the $500,000 to $750,000 condos. The foreign buyers who typically purchase that type of housing are middle-class recent immigrants working in Vancouver, he noted.

“They’re the people who can least afford the tax and will likely be forced in a default situation because the banks won’t lend on tax,” said Ash. “At the very least, the government should have grandfathered the existing deals.”

It’s difficult to determine exactly how much of Vancouver’s slowing housing market can be directly attributed to the foreign buyer tax; however, the market seemed to be correcting since June. Ash said the provincial government’s decision to intervene in the market could significantly accelerate the slide in home sales.

“These are uncharted waters; anything could happen.”