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What you need to know about COVID-19: October 20, 2020
In the City of Toronto median home prices rose by 8% or $55,000 to $720,000. The increase of $55,000 represents almost 94% of the median Toronto household after-tax income of $58,264, according to a study by Zoocasa.
When Canada Mortgage and Housing Corp. published its take on imbalances in the country’s housing market last February, it found everything was just fine in Ottawa, if not for the country as a whole.
Seven months later it’s a different story, at least in the nation’s capital. The housing market here is moderately overheated, the federal agency concluded this week, and prices are accelerating too quickly. On the other two metrics tracked by CMHC — evidence of overvaluation and too much building — Ottawa looks in better shape, the agency noted. Overall, Ottawa rated a moderate degree of “housing market vulnerability” compared with low risk pre-pandemic.
CMHC analyst Anne-Marie Shaker nevertheless signalled there could be a problem down the road if prices continue surging at their current double-digit rates. “With weaker income and robust (house) price growth,” she wrote, “the potential for overvaluation has increased, particularly once COVID-19 financial supports are removed.”
For Ottawa residents used to seeing bidding wars and houses sold significantly over asking price, the puzzle is why isn’t the market considered overvalued already?
Average residential properties sold last month for nearly $600,000 and news of homes changing hands for more than $1 million are hardly exceptional in areas such as Manotick, Westboro and Manor Park. Many property owners are suffering sticker shock because the increases have happened so quickly.
Yet, taking the longer view, it’s clear that Ottawa real estate is to a large extent still playing catch up. Consider that benchmark house prices in Vancouver, Toronto and surrounding towns surged more than 60 per cent during the four-year stretch between February 2013 and February 2017. Homes in Ottawa during that period crept up just seven per cent. Not to mention that homeowners here started from a much lower base — $357,100 benchmark price (the industry’s tabulation for a typical house) compared with $524,400 for Toronto and $901,900 for Vancouver, according to the Canadian Real Estate Association.
Since February 2017 however, Ottawa’s single-family homes have appreciated nearly 33 per cent to a benchmark price of $566,100 in August 2020. Not only is that the fastest growth in the country, it far outpaced price gains in Toronto of less than four per cent, and a marginal drop in Vancouver.
Despite that, Ottawa’s property values are considered a bargain by potential buyers from the country’s two largest cities. In August, the benchmark value for single family homes in Vancouver was $1.5 million. In Toronto, it was $1 million.
Look at it another way. The average capital gain for a homeowner in Toronto has been $475,000 since February 2013 — and roughly $600,000 for a Vancouver property owner. The gain alone is enough, or nearly so, to buy the average Ottawa house.
Little wonder that local realtors are reporting increasing instances of out-of-town buyers.
Copyright Postmedia Network Inc., 2020