Well, 2014 was a tough year for Ottawa realtors: she was fickle, unreliable, and demanding. I think most of us will be happy to see the back of her. What will 2015 hold?
More bad news for sellers, I think, as days on market (that’s how long it takes to sell a house) continue to lengthen. We could be slipping into a situation like it was in the nineties where house prices stagnated or even fell year-to-year, and that lasted for close to a decade. But the operative word is “could.” There are a lot of variables that could also see the market start to recover in 2015 from what’s already been a three or four year slump.
1) We are heading into an election year in 2015. Whether that’s spring or fall, it is usually accompanied by spending promises. In Ottawa, having the western extension of the LRT finalized and funded could see a flurry of construction activity. Inconvenient, yes, in terms of road closures and getting around town, but that kind of massive project creates jobs. Housing near the LRT stations usually goes up in value (10-30%) so smart buyers will be looking around those hubs for long term investments.
2) As the US economy picks up steam, we may see a rise in interest rates. You’d think that would depress the market but it’s the kind of thing that can spur people who have been fence-sitting to get into the market while they still can. I think a lot of buyers have become enured to the low rates and forget that what goes down will eventually go up. 2015 could be the year we see interest rates start to twitch; that may see a short term increase in sales here in Ottawa.
3) As we’ve seen recently with oil prices, what goes up also comes down. The sudden drop in oil prices will likely shift economic activity back to Ontario as the costs of transportation/manufacturing drop and the economy adjusts to what could be a long term situation. (Not so unexpected to me, by the way: I predicted a drop in oil prices months ago, having lived in Alberta in the late 1970s when the price of oil plunged overnight. A pal of mine, a Calgary realtor, insisted that oil prices would stay firm but I sold off my stocks and put my money into bonds in September.) Any improvement in Ontario’s economy will see a spin-off effect in real estate; it’s one of the economic drivers.
4) There could be a change in the federal government. I suspect that would have an enormous effect on the public service, which has been deeply demoralized in recent years, and subjected to deep cuts (around 37,000 people were let go). On the other hand, a minority government creates uncertainty which is never good, particularly in the Ottawa real estate market; that could hold off a recovery for another year or more.
There are other negatives too, of course. If the Toronto real estate market continues to be red hot, even though ours is in a slump, the federal government may introduce further mortgage changes to slow things down there and in Vancouver (the Calgary market, given the plunge in oil, should self-correct, and quickly). The changes they’ve made so far have had already had a depressing effect on our market; any more of them and things could take a real nose-dive. As it stands, it already takes 82 days on average to sell a home here compared to 18 in Toronto. I hope they leave things alone: markets tend to adjust all by themselves. But they could intervene so that could be a factor as well.
Overall, I think the Ottawa market will be a great place for buyers as prices drop, particularly first time buyers. It won’t be quite so great for sellers, who will need to be aggressive in pricing, and realize that this is not the market it was even a few years ago. Even with bargains and deep cuts, this is not a market for flippers but 2015 will be a great time for renters and investors to think about buying. It may be slower than we’d like, but it’s still a relatively stable market in a great city.
So those are my predictions for 2015 – we’ll check back in a year and see if I was right or wrong! Happy New Year!