The year ahead: Builders adapt to pent-up demand and market predictions

Ottawa’s booming tech and government sectors, and Torontonians flocking to the area, could put pressure on the housing market this year—but homebuilders are pioneering new ways to meet demand.

“I expect Ottawa to continue to show strong fundamentals – high employment, population growth, pent-up demand – that will power demand for homes in 2021,” said Jason Burggraaf, executive director of the Greater Ottawa Home Builders’ Association.

Homebuilders are finding innovative ways to connect with consumers to keep up with the demand for new housing, he said.

“2021 is going to continue to be a very busy year for the industry as sales in 2020 kept pace with previous years’ numbers despite COVID,” said Burggraaf. “Builders quickly adapted their sales strategies and moved to even more online engagement which worked for homebuyers.”

Last year, builders such as Cardel offered online webinars to introduce new communities (see Pg. 7), and several new launches and grand openings also went virtual. Last fall, eQ Homes launched The Spencer using a virtual appointment booking system as did Mattamy when opening The Promenade—appointments were fully booked.

In terms of why Ottawa has become such a popular market, there are no surprises.

“Ottawa real estate continues to see high demand from Toronto buyers who are looking for less density and more outdoor spaces,” said Jason Ralph, managing partner, Royal LePage TEAM Realty.

“Living in Ottawa gives you access to great schools and healthcare, a good job market and you can maintain a city lifestyle while affording a much larger home than what is offered in the GTA,” he said. “Many local buyers struggled to find what they were looking for in 2020 due to low inventory. With their return to the market in the spring coupled with continued demand from the GTA, prices are forecast to rise significantly.”

According to data from the Royal LePage Market Survey Forecast, which provides year-over-year price expectations for Canada’s nine largest markets, the median price of a condo in Ottawa is predicted to increase by 7.5 per cent to $417,900 and the median price for a two-storey detached home could rise 12 per cent to $656,300.

“There was a clear shift towards larger properties and single-family dwellings in 2020, as families repurposed homes to become their office, school classroom, gymnasium and restaurant during the pandemic,” said Phil Soper, president and CEO, Royal LePage. “We expect this trend to moderate as life returns to normal in the months ahead.”

2021 market predictions

From James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage

1. The Bank of Canada will leave the overnight lending rate unchanged for the entire year.

As the vaccine rolls out it will take time to translate into a full economic recovery. The Bank will be patient in raising rates until pre-pandemic economic indicators are achieved. Therefore, the prime lending rate for variable rate mortgages and HELOCs will remain unchanged.

2. Real estate prices (other than condos) will appreciate by 4 – 7 per cent with the strongest growth in the suburbs around major urban centres.

With Canadians working from home, the demand will continue to be strong for more space. Larger homes outside of the city centre will see the strongest demand.

3. Condo prices in downtown urban centres will fall in the first half of the year, before stabilizing in the second half.

University students learning remotely, the lack of immigration, and the crack down on Airbnb, will continue to weigh on condo prices. When students return to campus and borders reopen for new Canadians, demand will return to the condo market. With home values surging, condominiums will be the only option for priced out first-time homebuyers.

4. Fixed rates will be modestly higher at the end of 2021.

As the vaccine rolls out across the country and there is optimism that the worst of the pandemic is behind us, Canadians can expect bond yields to rise which will cause mortgage providers to modestly increase fixed rates.

5. There will be no new mortgage regulation introduced in 2021.

The government and regulators are focused on the pandemic recovery, therefore they will not introduce any new rules which would make it any harder for homebuyers to qualify for a mortgage.