Ottawa may not have Toronto’s effervescent housing market, but a more recent development points to a change in scenery: according to a recent study by RBC, Canada’s capital just replaced Toronto as the housing market with the third highest volume of foreign residential transactions, right after Metro Vancouver and Victoria.
The factors driving the change
This sudden shift is not mainly due to investors’ increased interest in the Ottawa housing market, but rather to a steep decline in the volume of foreign residential transactions in the Greater Toronto Area. Year-over-year, the percentage of foreign transactions in Ottawa saw only a 0.4% increase, going from 2.1% in April-May 2017 to 2.5% during November 2017-February 2018. The main reason behind this change is foreign investors’ waning interest in the Toronto area market – the share of foreign-buyer transactions fell steadily in Greater Toronto over the past 12 months, going from 5.9% in May 2017 to a meager 2.1% in February 2018.
Source: RBC Economics, Huffington Post
The taxes associated with Ontario’s Fair Housing Plan may have played a substantial role in the process, according to Huffington Post. As Daniel Tencer remarks, “the province’s Fair Housing Plan, introduced in April 2017, slapped a 15-per cent foreign buyers’ tax on properties in the Greater Toronto and Greater Golden Horseshoe areas,” forcing at least some of the foreign home-buyers to reconsider and head for the capital instead.
The far-reaching consequences
Whatever the reasons, the consequences are already noticeable; Ottawa’s housing market is heating up. Home sales were up 12.3% in March, while the average home price increased 8%, reaching $447,561. But an average is just that, an average – many real estate agents state that some of the most desirable neighborhoods, like Westboro, are looking at 50% jumps in home prices. The Canadian capital is also seeing shrinking housing inventories and realtors state that homes are staying on the market for shorter periods of time.
The growing pressure on the for-sale market is beginning to affect the rental market as well. The average rent for a one-bedroom apartment increased 8% over the year, while the average rent for two-bedroom apartments jumped 10%, reaching $1,430. All these changes show that the recent measures aimed at cooling the overly robust Canadian real estate market may have other, unexpected effects as well.
This article first appeared in The Huffington Post