Low inventory: COVID real estate price rally pushes through October

“We’re seeing families with kids looking for bigger properties. They’ve been cooped up in their existing houses for so long.”

Author of the article:James BagnallPublishing

OTTAWA - Real estate agent Yvan Rhéaume poses for a photo at 190 West Lake Circle in Ottawa Wednesday Nov 4, 2020. The home sold for $1.2 million - about $250k over asking.  Tony Caldwell
Real estate agent Yvan Rhéaume poses for a photo at 190 West Lake Circle. The home sold for $1.2 million, about $250,000 over the initial asking price. PHOTO BY TONY CALDWELL /Postmedia

When Yvan Rhéaume listed a semi-rural bungalow for sale last Friday, he hadn’t expected quite so much interest. The Right at Home sales agent was asking $950,000 for his client’s property in the West Lake Estates subdivision a few kilometres south of Carp.

Rhéaume was used to seeing strong bidding wars for residential properties listed between $400,000 and $500,000, but less competition for more expensive homes. This sale would prove different. By 7 p.m. Monday, the deadline for would-be buyers to submit offers, Rhéaume had received nine bids, all of them over the asking price. His clients accepted an offer for roughly $1.2 million.

Low inventory: COVID real estate price rally pushes through October
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“A house on the same street, the same size, had recently listed for $850,000 and sold for $1 million, so we knew we were in the right area as far as price goes,” Rhéaume said, “but I did not expect so many offers.”

His clients were ecstatic. They had planned to continue working for three more years until they were mortgage free and then move back to the Maritimes to be with family. Now those plans have been expedited.

Without doubt, this has been one of the strangest years for Ottawa’s housing resale market. After the number of sales plummeted more than 40 per cent year over year in March and April in response to the pandemic — and price increases dipped to single-digits — the city’s 3,000 real estate agents look to be making up all the ground lost and then some.  Sales of condos and single-family homes for the year will likely match the number posted in 2019, which was a very good year.

Average price gains since July have topped 20 per cent year over year for residential properties, including a 24.7 jump in October to $603,500, according to data published Wednesday by the Ottawa Real Estate Board. This data includes houses and condos sold in Ottawa proper as well as those in surrounding towns such Kemptville and Arnprior. Separating these two groups, the average price for residential properties sold in Ottawa improved 24 per cent to $665,000, while residential properties in the valley surged 30 per cent year over year to $442,000.

The price gains for condos across the Ottawa region were a less robust 15.5 per cent to $369,000. Indeed there are signs that the condo resale market is cooling somewhat as inventories climbed 14 per cent year over year compared to a 46 per cent decline in residential listings overall.

“The lack of inventory is definitely pushing up prices,” said Paul Rushforth, who runs the real estate agency that bears his name, “Next year will be strong as well.”

OTTAWA -- Ottawa realtor Paul Rushforth at one of his listings that recently sold for well over it's asking price. Tuesday, Nov. 3, 2020 -- . ERROL MCGIHON, Postmedia
Paul Rushforth says a lack of inventory is pushing up prices in the Ottawa region, and the market is expected to remain active next year. PHOTO BY ERROL MCGIHON /Postmedia

The Carp area sale encapsulates several key trends driving real estate prices.

The main push is coming from historically low interest rates that have sharply reduced borrowing costs associated with mortgages.

Residential property values here are also playing catch up with Vancouver and Toronto. Average house prices there and in surrounding areas surged more than 60 per cent between 2013 and 2017. Since then, Ottawa’s resale market has outpaced most of the rest of the country, albeit not enough to make up the difference. Prices here really began moving up sharply starting in mid-2019.

From June 2019 to September 2020, the benchmark price for single-family homes moved up 24 per cent to $581,000 according to the Canadian Real Estate Association. Across the country, only Woodstock, Ont., saw a faster rate of price growth during this period.

The pandemic is also prompting a frantic search for more space.

“We’re seeing families with kids looking for bigger properties,” Rushforth said. “They’ve been cooped up in their existing houses for so long.”

Indeed, a look at the region’s real estate districts reveals a distinct shift favouring country living is under way. Residential prices in the Carp area surged 54 per cent year over year to $806,000 for the 16 homes sold in October, according to the Ottawa Real Estate Board. Other big gains in market value could be seen in semi-rural areas such as Greely, Manotick, Bells Corners and Stittsville.

Towns outside the city core also witnessed sharply increased interest. Gains in October topped 40 per cent year over year in Kemptville, Almonte and Smiths Falls.

“People who grew up in rural areas and moved downtown now have the opportunity to move back there,” said Zak Green, a sales representative with Engel & Völkers. “Retirees with great pensions are buying rural properties. So are younger people pre-children”.

The same night Yvan Rhéaume sold his Carp bungalow, a one-story home in North Kemptville listed for a shade under $400,000 also sparked a bidding war. The result: a final offer in excess of $540,000.

Another sign of the times.

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