Friday, October 25, 2013

Over supply of Ottawa condos

Interesting article from the CBC on condos called - Ottawa condo surplus causing prices to drop

For 10 years, condominium prices in Ottawa had enjoyed steady growth. They rose by an average of five-and-a-half per cent every year, and sometimes as much as 10 per cent in a single year.

But this year, condo prices have dropped by more than two per cent so far.

Nearly 1,700 condominiums were up for sale in Ottawa in September — up from 1,120 in 2011, according to the Ottawa Real Estate Board

The Canada Mortgage and Housing Corporation (CMHC) said the market should turn around by next spring if people buy up in anticipation of interest rates edging up.

"All these first-time home buyers who are taking their time will probably jump in the market by then. Then the market will start rolling again," said Sandra Perez Torres, a senior CMHC market analyst.

To read the full article, please click here

Statistics can be somewhat misleading if taken without context.  A full analysis of the available data is necessary to gain a complete understanding of the additional listings on the MLS market.  With a quick review of a few factors that jumped to mind, the total number of listings are up, so the just of the article is accurate.  A full statistical analysis would be necessary to get more accurate numbers, but my quick review netted the following results:

Interestingly, the article does not speak of for sale by owner properties that are now on MLS.  Grapevine, for instance has 143 condos listed for sale, which would now be included in the 1,700 (which on my review from MLS states there are actually 1,611 condos for sale, not 1,700).  There are another 77 properties listed on MLS as mere postings (which did not exist in 2011).

Ottawa builders are now listing many units or even complete buildings on MLS.  Historically, builders have not listed properties on MLS and if so, they usually only listed a couple units.  Doing some quick research online, there are about 218 new home condos listed on the MLS system.  Two years ago, it was not common practice for home builders to list properties on MLS, there were only a a few listed per site (usually 2 or 3), but for a conservative assumption, we can assume there are 150 more pre-built new condos on MLS than two years ago.

This accounts for approximately 427 units listed on MLS that were likely for sale 2 years ago, but were not advertised on MLS.  That would bring the number from 1,611 to approximately 1,184 units for sale in 2011 adjusted numbers. 

Furthermore, there have been approximately 21,000 people move into Ottawa in the past two years (from immigration).  Roughly three people live in each home in Ottawa, so that would imply 7,000 new residences needed.  Data suggests that 1 in 4 properties in Ottawa are a condo.  These immigrates are likely not buying homes, they are renting homes, but within their first five years in Canada, studies by CMHC show that this group will be buying homes.   

The data presented here is not exact, it is a best assumption based upon available information I could access.

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