What can we expect for Ottawa real estate in 2023? Due to all the rumours flying around right now, that truly is the million-dollar question.
The fact is, it’s a whole new year and a whole new market with all new rules. For expert advice, we sat down with Paul Rushforth and learned what buying and selling property in Ottawa will really be like in 2023.
So sit back, relax, and let’s talk real estate!
1. What big surprises were you shocked to see in 2022 regarding real estate?
2022 was one of the weirdest years I have seen in real estate, and I’ve been in the business for about 19 years now.
Never have I seen prices skyrocket as fast as they did. The beginning of the year was crazy, with incredible price growth leading to record highs—the average sale price was up almost $100,000 in just four months. I’ve also never seen interest rates go up as quickly and as often as they did this past year.
2. Are we experiencing a market correction in 2023?
Absolutely, we’re seeing a correction. We’ve definitely regressed, thanks to the rising interest rates. But we need to realize we accumulated so much wealth in our properties over the past two years that this isn’t surprising; we’re simply coming down the mountain we had climbed a little bit.
You might see headlines that state, “Canada is in the middle of a housing market crash,” but keep things in perspective and remember that our city is unlike other Canadian housing markets. Ottawa is unique and should never be compared to national home sales reports, especially those that include major cities like Toronto and Vancouver. What happens there will not determine what happens here; we must analyze our market based on Ottawa trends and Ottawa data.
3. What kind of real estate market will 2023 be?
We’re starting 2023 in a balanced market. I say this because, if you look at the city of Ottawa as a whole, we currently have about a four-month housing supply. Guidelines state that 0-4 months of inventory is considered a seller’s market, 4-6 months is a balanced market, and 6+ months is a buyer’s market. So, with our four months of inventory, the Ottawa market is balanced.
That said, there are certainly pockets of the city that remain in a seller’s market and others that are sitting squarely in a buyer’s market. For example, I recently told some clients to hold off and not add to the glut of townhomes currently for sale in the South of Ottawa suburbs. At the same time, I encouraged a family in a different area to get into the market immediately because there were no comparables.
We’re in a very divided market right now, so you need a knowledgeable team, like Paul Rushforth Real Estate, to give sound advice and guide you through this uncertain market.
4. How will changes in interest rates affect the Ottawa market in 2023?
This year’s real estate market story depends entirely on interest rates, and some important announcements coming soon will impact whether you should buy, sell or rent an Ontario property.
If we see a drop in interest rates, our second half will be a robust seller’s market. I’m sensing a bit of optimism out there, so there is a good chance this will happen. And, since we have a limited supply, once the interest rates drop, it’ll force house prices up.
If the interest rates remain the same, we’ll stay in a fairly typical market where some areas are balanced, some are in a buyer’s market, and some are in a seller’s market.
If we see further rate hikes, it’s going to be a very tough, stale market. Higher interest rates will translate into rising mortgage rates and keep buyers out of the market.
5. How will the 2023 real estate market compare to 2022?
2023 will be a very different year for Ottawa real estate.
Looking at the number of home sales, we are already down 35% compared to one year earlier, and now we’re stuck in a stalemate. Why a stalemate? Because due to questions around interest rates, people aren’t sure what to do.
All this is also impacting the rental market. We currently have a lot of rentals available because folks are struggling to sell. However, rental prices aren’t coming down because renters have taken themselves out of the market, so demand remains high.
Again, if the interest rates come down, things will change, and the floodgates will open. If they don’t, it’ll be another story.
6. Which property types will make the biggest impact in 2023?
We should closely watch the townhouse market in 2023.
We saw a very healthy condo market in 2022 because people couldn’t afford townhomes or single-family homes. Presently, we’ve got a glut of townhouses available in Ottawa suburbs, a situation which is driving prices down and increasing affordability. I think people will find they can afford a townhome or a small single (vs a condo) as the prices start to fall. So, this year we’ll see many townhomes change hands in areas like Riverside South, Findlay Creek, Kanata, Orleans, etc.
The townhouse market will be tough for sellers but great for buyers.
7. Have specific neighbourhoods in Ottawa experienced an increase or decrease in pricing and popularity this year?
Yes! First, I believe the fastest-moving sales price in 2023 will probably be between $500,000 and $750,000. Areas with $1M+ homes are already starting to see prices come down, mainly because rising interest rates make it so hard to afford something in that range. And some builders have slashed high-end home prices by $300,000. (Yes, hundreds of thousands of dollars! A correction was needed to move inventory.)
Next, we’re seeing homes in older, more mature neighbourhoods selling very easily. Because they have less inventory, prices will rise in these well-established communities. On the other hand, the opposite is happening in newer areas (some of which were recently considered up-and-coming neighbourhoods). There is a lot of competition where new home builds are prevalent, which is driving down prices.
Lastly, we expect the activity in the core to outpace the outskirts. Back in 2022, everyone could work from home, and it was cheap to build in the outskirts. Thus, demand was strong. Now, with high gas prices and many employees returning to work in 2023, we believe more interest will shift to “Ottawa proper.”
8. What areas in Ottawa should investors look into buying in 2023?
If I were an investor, I’d look in suburbia where prices—especially for townhouses—will come down even more than they already have. I’d probably start in west and south Ottawa because there is a lot of inventory in those areas. We’re also seeing price decreases in Orleans, so that’s another area investors should check out.
9. What does the 2023 housing market look like for millennials and first-time homebuyers?
It’s a real struggle for first-time homebuyers to buy real estate right now. Getting into this market is hard—you’re battling high prices and high interest rates. Unfortunately, this takes first-time buyers out of the market and pushes them into the rental game.
Millennials are tigers on the sidelines, ready to pounce. They’re waiting for interest rates to drop, and they’ll jump right in the second they do. Millennials will drive this market if the rates come down. If the rates don’t come down, they’ll stay on the sidelines, and we’ll have a very stagnant market.
10. What’s your advice for buyers and sellers in 2023?
Buyers: Listen to me; you have 3-6 months to enter this market! I said the same thing at the end of 2021. My words were, “get in before the market goes insane.” And look what happened from January through April 2022; it went insane! So I’m repeating it now because if interest rates drop, this market will take off fast—really, really fast.
Sellers: My advice to you is to call us first because we will give you educated advice on whether or not now is the right time to sell. Many agents will tell you, “Yeah, it’s a great time to sell. Get in the market!” But everything depends on the area right now, and you want to avoid entering a market that’s flooded with a certain product. If you do, you’ll have to come in with a lower sales price than everybody else.
If now is a good time to sell, or you’re in a position where you need to, contact us. We’ll perform a market analysis and offer listing advice based on real comparables. We’ll find out how much area homes have sold for and utilize the home price index to adjust the pricing over time for your particular area. (There’s no other way to do it in today’s market. Things have changed so quickly that you can’t look at the previous year or even what happened a few months ago.)
Hire Agents Who Are Ready For 2023!
During these uncertain times, you need agents with unsurpassed knowledge of Ottawa’s real estate market. No one is better prepared than anyone to face whatever 2023 brings than the Paul Rushforth Real Estate team.
Whether you’re buying, selling, or investing, we’ve got the advice you need. Contact us today!