Looking for a bargain? Surplus condos in Ottawa

[Julie Toh]

This article was published recently in the Canadian Real Estate Magazine.

Condos are set to flood the Ottawa market in coming months, and that could be a major cause for concern. The problem is, Ottawa is already awash in unsold units.

The Canadian Mortgage and Housing Corp. said that the growing number of surplus condos has put Ottawa’s market at moderate risk, causing CMHC to warn builders planning further condominium construction, according to the Ottawa Citizen.

Currently, there are more than 589 new condo units on sale in the capital. That’s about an eight-month supply of condominiums, according to CMHC market analyst Anne-Marie Shaker.

“We see a lot of incoming supply and active listings at the moment,” Shaker said at CMHC’s Ottawa Housing Market Outlook conference. “Listings continue to go up and sales have plateaued. Condos alone are on the edge of being a buyer’s market.”

That could mean further price decreases in a market that’s already seen three straight years of falling prices, according to the Citizen. In 2013, average condo prices dropped 5.6%, followed by a 7.3% decline in 2014. So far this year, condo prices have fallen 1%. At the same time, prices have been rising for non-condominium residential properties.

The market is now being driven by repeat buyers who’re looking for detached homes, according to the SMHC. First-time buyers just aren’t that interested in condos – especially once maintenance fees are piled on top of mortgage and carrying costs, Shaker said.

In October, 202 resale condos were sold in the capital, according to the Ottawa Real Estate Board. While that’s a slight increase over the 194 sold in October of 2014, the average price was down 13% from the same time last year.

And condo builders seem to be taking heed. According to Shaker, builders are scaling back new construction. In the first nine months of 2014, builders started 1,100 units. During the same period this year, that number had fallen to 700, according to the Citizen.