2021 REMAX Housing Affordability Report and Living in Ottawa Real Estate Market

Living in Ottawa may be a nice pick if you are considering relocating within Canada. The June 2021 RE/MAX Housing Affordability report lists Ottawa as one of the top 10 places to live in Canada. The REMAX Housing Affordability Report has come out monthly since 2008. It is based on MLS data (MLS stands for Multiple Listing Service and is the database used by realtors to access properties for sale).

REMAX Housing Affordability Report

The 2021 RE/MAX Housing Affordability report shows that Ottawa real estate is one of the more affordable housing markets in Canada. The city is ranked six out of sixteen surveys. That ranking is determined by looking at the percentage of a home buyers monthly income that is needed to pay a mortgage. This assumes a down payment of 25%. Urban areas are frequently more expensive, but the report shows that most urban centres in Canada are actually undervalued. At least 75% of the house should be priced higher.

Real estate prices however, have been on the rise in the city. It does remains a good option for first-time buyers. Prices have gone up about 20% in the last two years, so many first-time buyers are focusing on condos. This is a change from pre-COVID-19 where most first-time buyers focused on town homes.

Many regions in Canada currently have price values that are valued incorrectly. In other words, they are selling for much more or much less than they are worth. Ottawa is one of the few cities in Canada where sales prices are accurately valued. This means that when you purchase a home, you do not necessarily need to worry about the value dropping dramatically.

Home prices

The average price for new homes in Ottawa is $200,000 to $350,000 (condos are on the lower end of the range). This is significantly lower than in Toronto and Ontario where average prices are $883,520. Vancouver sits at the highest rates with an average price of $1,061323. St. John’s is considered the most affordable city in 2021. The average selling price at $307,619. Most properties in Ottawa receive multiple offers during the sales process. This makes home buying competitive. Continued limited supply will likely keep prices the same for the rest of 2021.

Although 42% of Canadians say that high prices are keeping them out of the housing market, prices are actually only up about 4% from last year. Going beyond your first impression, or what you perceive, moving to Ottawa may be a good choice.

Facing the challenge:

How do you face the challenge of buying that first home? Many first-time home buyers have been priced out of the market. Only about 38% surveyed, though say that housing prices are the primary factor for this. Others cite low salary levels, fear of rising interest rates, or inability to save for a down-payment.

As a result, people are coming up with creative ways to meet the challenge. In Ottawa, two families sometimes share the same home (splitting the floors between them). Others rent out single rooms, or smaller portions of the home. Multi-generational housing is also common. Parents are living with their adult children and grand-children. About 1 in 3 Canadians at least consider alternatives to traditional housing.

Buyer Demographics:

Gen Z and Millennials make up 54% of those who look at alternative ways to purchase a home. Additionally, 15% of Canadians report that during the COVID-19 pandemic lockdowns, they were able to save enough money to use as a down payment for a new home. 71% of younger Canadians (ages 18 through 34) say they are significantly concerned about being able to afford a home. Many of these younger generations believe that a national housing strategy would make new homes more affordable.

The Gen Z and Millennials are also willing to change neighbourhoods or regions to be able to buy a home. In fact, 20% of them say that the only way they could afford a home would be to move to a new province. As more and more business allows remote work, moving to Ottawa may be a good decision for this young workforce.

Christopher Alexander is Chief Strategy Officer and Executive Vice-President with RE/MAX of Ontario-Atlantic Canada. He believes that creative solutions and a stop-gap measures will only help so much. He believes there should be a national strategy to increase housing supply. Without this, he says housing prices will continue to rise as supply shortens.

Neighbourhoods in Ottawa:

RE/MAX agents in Canada were asked what they thought the most affordable neighbourhoods in their areas were. Realtors in Ottawa found plenty of affordable neighbourhoods in Ottawa. They include Hawthorne, Carleton Place, Vanier, Glen Cairn, Centertown, and Orleans.

On the list, only Centretown makes a very high grade. This is largely a walking or biking community, with little vehicle ownership. There has been a surge of apartment construction. The area includes restaurants, retail, parks, and museums. Nearly half of the population is made up of Millennials.

However, even Carleton Place (which scored the lowest on this list) offers decent scores when it comes to both Housing Suitability and Housing Mobility.

Neighbourhoods on the higher end of the spectrum include Westboro, Rockliffe Park and Alta Vista. 

Ottawa is large enough to provide a great deal of choice. The city population is over 934,000 and is diverse enough to include urban, suburban, and rural areas. The city consistently ranks high among cities that are considered desirable places to live. It is a multicultural city, but still has a small-town feel. There are a variety of employment opportunities (there are six universities and a thriving technology industry). The unemployment rate, however, is 8.6% (December 2020). That is above the national average of 5.67%.

Mortgages:

Record low interest rates in 2020 gave people the opportunity to enter the housing market. These low rates are predicted to rise, perhaps as early as 2022. Buyers without a fixed-rate mortgage may see increases. Nearly half of Canadians expressed concern over rising prices. They also worried about shortfalls in their salaries, lack of full-time employment, existing household debt, and the fear of being house poor (where so much money goes to pay the mortgage that quality of life actually diminishes due to lack of available funds).

They also worry about the mortgage stress test. The Office of the Superintendent of Financial Institutions (OSFI) requires that the minimum qualifying rate for uninsured mortgages (where home buyers have a 20% or higher down payment), is either the mortgage rate plus 2%, or 5.25% (whichever is higher). These rates were increased in January 2021. Although it is possible that it may hurt home sales, RE/MAX believes that there will not be any significant change. The mortgage stress test was developed to ensure that buyers were able to afford their mortgage debt. The OSFI reviews the mortgage stress test yearly. Because of the potential for change, some people worry that if they do not buy a home now, they will not be able to afford it in the future.

The First-time Home Buyer Incentive (FTHBI)

The First-time Home Buyer Incentive (FTHBI) can provide Canadians with an affordable way to produce a down payment for a new home. 35% of new home buyers take advantage of the FTHBI. 31% of those who did not use the FTHBI said that they were not aware of it.

The REMAX Housing Affordability Report shows that of those able to afford homes, the majority are over age 35. They live in rural or suburban areas and earn $80,000+ a year. Those who cannot afford homes are generally under age 35, live in an urban area, and make less than $40,000 per year.

It is interesting to consider the long-term impact of the COVID-19 pandemic lockdowns. More businesses are continuing to allow employees to work remotely. Previously, younger workers frequently worked in urban areas. They were unable to afford housing in the area, and long commutes may have made life difficult. The ability to work remotely may change that dynamic. Housing is often far more inexpensive in suburban and rural areas. If Millennials and Gen Z can work from home, will they move out of the heavily populated urban areas where they can afford to purchase a home?

Moving to Ottawa

Moving to Ottawa may be an answer here. While rural life has its appeal to many, Millennials and Gen Z often want access to pubs and restaurants, as well as centres for arts, music, and museums. A heavily rural area may not meet their needs. But cities like Ottawa have neighbourhoods with a diverse array of activities available. While the city does not have the lowest prices for new homeowners, it is far more affordable than cities like Vancouver, and certainly provides many of the same urban activities.

Now may be the time to take advantage to moving to Ottawa. Interest rates remain low. Fixed-rate mortgages will help to keep buyers from suffering through dramatic increases. Although there is high demand for housing, there is certainly affordable housing available. This creates an appeal for both remote workers, as well as immigrants looking to start a new life in Canada. Programs such as the First-time Home Buyer Incentive help ease the burden and workarounds (such as buying a property to share with family or friends) make purchasing a home for a first-time buyer more palatable.

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