A Good Time to Invest in Real Estate in Ottawa

If you follow the news these days you might be lead to believe that Ottawa and Canada were on the verge of a US style housing bubble crash and that home prices were doomed to crash. While it may be true in some metropolitan regions across Canada, experience downward pressure on house prices, Canada and Ottawa in particular are in an entirely different dimension that the US.

In the US at it is estimated that as many as 20% of all home owners, (some 25 Million home owners) may be at risk of mortgage default or have mortgages that are worth more than the current market value of their homes. In Canada the number of home owner's at risk of default is estimated at between 0.25% and 0.3% or fewer than 30,000 homeowners across the country, and more than 95% of those are CMHC insured.

At the same time, while the US economy continues to languish and joblessness is at its highest levels since the 1930's, Canada's economy, and in particular, Ottawa's economy has weathered the recession quite well and employment is rising.

Ottawa in particular has been largely insulated from the current and past economic downturns primarily because of the Provincial and Federal Government, which directly or indirectly accounts for more than 70% of employment in the region.

So is now a good time to invest in real estate in Ottawa? Consider the following:

• According to Stats Canada, based on the 2006 Canadian Census, the  average size of a household in 2006 was 2.6 people and declining.
• The City of Ottawa's 2009 Residential Land Strategy for Ottawa 2006-2031 paper, projects a requirement for 147,532 new dwellings, approximately 6000 new units every year, between mid-2006 and mid-2031 to accommodate and expected population growth of some 350,000 people during that period. They also projected that:
• between mid-2006 and mid-2031, 91% of all new dwellings (134,254) will be built in the urban area and 9% (13,278) in the rural area.
• new rural dwellings at 94% single detached, 1% semi-detached, 4% townhouses and 1% apartments.
• new urban dwellings at 35% single detached, 5% semi-detached, 29% townhouses and 31% apartments.

• Ottawa projected population growth of some 15,000 people per year will requires approx. 6000 new residential units per year just to keep up. 
• To achieve a distribution of 31% of new construction as condominium apartments, Ottawa builders will have to construct approx. 45,000 new Condo apartments over the next 20 years. 
• Mortgage rates are at 50 year low's with local lender's currently offering 2.5% variable 5 year, 3.44% fixed 5 year and 5.19% fixed 10 year rates.
• Ottawa has one of the most highly educated work forces of any City in Canada 
• Ottawa also has one of the highest per capita incomes of any City in Canada
• Ottawa also has one of the highest per capita proportion of Baby Boomer's in Canada, whom as they leave the workforce in the coming years will require the migration of tens of thousands of new workers to the City to replace them.
• Baby Boomer's and Generation 'Y' households are the largest purchasing cohorts of new Condos.
• Home ownership rates in Ottawa are currently above 70%, but almost 30% of the households must still seek rental accommodations (which translates into approx. 2000 new rental units needed yearly for the foreseeable future)
• As mortgage rates rise over time, housing affordability for first time home buyers will decrease, increasing the proportion of the growing population which need rental accommodations.
• Properties in Ontario any property built after June 17th 1998 or "any building, or mobile home park, or land lease community, where that space was never previously occupied for residential purposes before November 1, 1991, are not covered at all by rent controls."

If you'd like to know how to buy 3 homes for the price of 1, drop me a line.