Red-hot market 'never before seen in Ottawa' hard on homebuyers

A red-hot home sellers' market in Ottawa is great for boomers looking to downsize. But for every family who cashes in, there's one literally paying the price.

The average price tagfora residential home in Ottawa in February2021 was $717,914an increase of 27 per centover the same month in2020.The average price for a condo last month was $407,671, 17 per centover February 2020.

Ottawa is just one of the Canadian cities experiencing a sales boom, being linked in part by ultra-low interest rates and the pandemic pushing people to purchase more private spaces.The national average home price is expected to rise by 16.5 per cent to just over $665,000 this year, according to the Canadian Real Estate Association.

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In the case of first-time buyer Anjali Dat, 33, whowanted out of her one-bedroom apartment, she spent six months actively searching for her dream home, armed with a preapproved mortgageand aided by a Realtor.

"I have a dogand I'm in my early 30s. I thought it was time to invest in a home. I didn't want a large home, but I did want to be able to go directly outside with the dog."

Then came the sticker shock.

I would put in offers that were higher than the list price, which a lot of my friends never had to do," said Dat. "I kept on being outbid by fairly large margins.- AnjaliDat

"I knew that things had become more expensive compared to a couple of years prior, when friends had bought homes, but I didn't quite understand the magnitude of the increase," said Datin an interview on CBC's Ottawa Morning.

Dat put in quality offers, to no avail.

"I would put in offers that were higher than the list price, which a lot of my friends never had to do," said Dat. "I kept on being outbid by fairly large margins $[10,000] to $20,000."

Dat realized she'd have to dig deeper.

"I did keep upping my price point, as the months went on, but it felt like I wasn't quite keeping pace with the market."

She grew discouraged, especially when she was badly outbid at times "by a full quarter of the list price. It really felt like it was impossible to purchase a home at all."

Dat considered suspending her search after her fifth failed offer,but her Realtor advised her to pace herselfand be more selective in her house huntto avoid burnout.

Then, on March 16, Dat's fortunes changed or rather, a homeowner accepted her fortune, in exchange for a house.

"It was my ninth offer," said Dat, admitting, "I did have to pay over and above."

Still, she's happy she found a three-bedroom home in Bells Corners, with plenty of space for her dog Evie. She takes possession in May.

What's driving Ottawa's sky-high real estate prices?

"It's definitely an exciting market, and a kind of market we've never seen before in Ottawa," said Debra Wright, president of the Ottawa Real Estate Board.

"It is very challenging for buyers," said Wright. "Part of what is happening here is we'vehad pent-up demand for a number of years.

"Then, as the pandemic progressed, lots of people started thinking about increasing the space they have to live in," said Wright.

The increase in demand is across the housing spectrum.

"Condo owners are looking to get in freehold houses," said Wright. "A lot of people are thinking about moving to the country. People are looking for properties with more yard."

While Dat was regularly outbid by $10,000 to $20,000, Wright knows of examples where the difference between winning and losing bids was six figures.

"There's a small townhouse in 2018 I had it listed in the low $300s. It was quite beautiful, but it was really small. It took us a while, but we finally got it sold in the low $300s. In the last couple of months, it went on the market in the low $400s. It sold in the high $500s."

Wright shares another example, of a moderately sized, single-family home in a good neighbourhood. Last year, it would likely have been listed in the mid-$600,000s.

"This year it was listed in the mid-$800s and it sold for well over $1.1 million," .

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The price creep is affecting even entry-levelhomes. In 2010, 35 per centof homes sold in Ottawa went forunder $400,000. In 2020, only 16 per centof homes were sold for less than that, according to Wright.

"It's not because people don't want to buy [under $400,000], but because the prices have increased," said Wright.

Crunching the numbers further, she said, 60 per centof homes in 2020 were purchased between $400,000 and $799,000. Early figures in 2021 suggestthat trend will continue.

Wright's advice to homeowners?

Know what you can truly afford. She's seeing "risky behaviour" as people desperate to buy are waivinginspections and putting in unconditional offers that push their budget.

"When you've bought that house unconditionally, you've bought it. You've got to find a way to pay for it," said Wright.