A new mortgage stress test that had the potential to dampen home sales is having no effect on Ottawa’s January 2018 housing market.
January new home sales in Ottawa were up more than 10 per cent from the previous January, continuing a trend of strong home sales for the past several months. According to a Greater Ottawa Home Builders’ Association monthly new home report, which is compiled by industry analyst PMA Brethour Realty Group, there were 396 new home sales in January versus 355 in January 2017.
Sales were also up compared to December, which itself had a stronger-than-usual showing of 318 sales.
On the resale front, meanwhile, home sales in January were up 7.2 per cent, with 712 properties sold compared to 664 in January 2017.
New stress test
All of this was despite another increase in the Bank of Canada’s benchmark lending rate in January, and the introduction of a new rule Jan. 1 affecting the buying power of home buyers. Under this rule, home buyers looking to make a down payment of 20 per cent or more must pass a financial “stress test” to ensure they will be able to continue making mortgage payments if interest rates rise. Until now, the stress test applied only to those making a down payment of less than 20 per cent.
“January’s new mortgage rule and interest rate increase had little affect on new home buyers, and the increase in sales indicates that the Ottawa market is already heating up,” PMA Ottawa president Cheryl Rice said in a release.
The strong performance in January was exactly what Rice expected. In a presentation to the Ottawa housing industry last month, Rice took both a look back at how the market performed in 2017 and forecast what to expect this year.
‘Fantastic year’
“Will 2018 be another great year?” she asked, referencing a “fantastic year” of new home sales in 2017. “We have affordable housing; we have jobs; we have high consumer confidence; we see economic growth … we have a very, very resilient Ottawa new home market … I’m hanging my hat on this, but I think we can expect in 2018 new home sales to match and possibly exceed 2017 numbers.”
Last year’s new home market was the strongest we’ve seen in almost a decade, with the 5,560 new homes sold far surpassing the 10-year average of 4,674. Rice attributed the strong showing to several factors, including an infusion of federal government jobs since Justin Trudeau’s Liberals took over in 2015 (which PMA refers to as the Justin-time bounce), pent-up demand, an increase in immigration and Toronto buyers looking for more affordable homes here.
“(Last year) was an absolutely incredible year for Ottawa’s housing community,” she said.
Townhomes rule
When it came to types of housing, Rice noted that “while singles and towns have jockeyed position over the past five years, in 2017 towns reigned king (although) singles are still a very popular product.”
That observation held true through January, with townhomes claiming almost half the market share at 47.5 per cent, followed by single-family homes at 38.6 per cent. Together, the two housing types accounted for 86 per cent of new home sales.
Perennial frontrunners Minto and Mattamy topped the market share, with each listed at about 20 per cent, and Richcraft continued with its strong performance from last year, claiming 10 per cent of the market.
Related
How the January resale market performed
