Monday, June 09, 2008

Ottawa Is The Cheapest City

When housing investors point to different cities in Canada, they each have a reason why investing there is a practical move. Toronto is Canada’s financial capital, Vancouver is one of the most beautiful cities in North America and has the upcoming Olympics, Calgary and Edmonton are flush in oil money and Montreal has culture, sophistication and one of the highest living satisfaction poll numbers anywhere. Left out of this discussion, in many cases, is Canada’s political capital, Ottawa. What is so redeeming about investing in this, one of Canada’s smallest cities? The answer is price and potential!

According to just-released numbers, Ottawa is the cheapest city of its size to live in in all of Canada. Only Quebec City ranked higher, but Ottawa was number one as far as major Canadian cities went. And even though housing prices are up sharply in Ottawa over the last five years, they still pale in comparison when held up against Toronto or Vancouver. What does this mean for the average real estate investor? It means that there is still a huge opportunity to invest in this beautiful city before prices rise further and the secret of this wonderful place gets out.

So, why Ottawa? Looking on the map, Ottawa is snugly tucked between both Montreal and Toronto, which has made it a popular choice for those needing to do business in both cities on a frequent basis. The home of Canada’s government boasts a metro population of just over a million people, and it is growing rapidly as more and more people realize the appeal of this "flyover" city. 2006 was truly a record year for home sales in Ottawa. It was one of several cities in Canada, including Montreal, Calgary and Edmonton, to break home sales records in 2006. The question is, of course, will this trend continue into 2007 and beyond.

Ottawa’s housing prices have been on the rise since the late 1990’s. During that time, the average home price was just around $125,000-$130,000. But a meteoric rise has gripped the city since then, with housing prices jumping to approximately $225,000 by January of 2004, but it is the rise since that point that has many people skittish about the future of home prices and investment in Ottawa. In the first half of 2005 alone, housing prices jumped from approximately $230,000 to $265,000 in only six months. To say that this growth is unprecedented in a city like Ottawa would be an understatement. Now, experts are trying to figure out if this jump was merely a self correction that put Ottawa back on pace with the rest of Canada (and remember, even with this growth, Ottawa is still the cheapest metropolitan city in Canada) or has rising prices signals a genuine housing "bubble" in the nation’s capital.

Home sales in Ottawa did not meet the national average, but they were still up much higher in 2006 then most experts believed. Sales rose in Ottawa almost 14% over 2005’s blistering pace, while home sales nationally climbed a tad under 18%. Critics of the bubble theory point to the fact that interest rates in Ottawa have remained low and unaffected by a perceived artificial housing bubble. The longer that this housing rise continues, the more and more it looks like is a natural market correction that got Ottawa on the same page with the rest of Canada than a bubble that will burst any time soon.

Predictions for the rest of 2007 are, as usual, all across the board for Canada’s capital. But since there has been very little in the way of concrete evidence of a bubble collapse anytime soon, the smart money is on continued growth in Ottawa for the foreseeable future, which makes this city a fantastic place to invest now and into the future.


Anonymous Anonymous said...

"Ottawa is snugly tucked between both Montreal and Toronto". Funny that one of the most often quoted benefits of living in Ottawa are the fact that it's relatively close to two other major cities. So, in other words, Ottawa is not a bad place to be if you can't spend the majority of your time in Montreal or Toronto. I'm often at a loss when it comes to citing the positive aspects of living in Ottawa, and your post did nothing to help that cause. I know Ottawa is 2nd or 3rd in the national rankings for most freezing rain in the winter, and is also highly ranked for disgustingly hot, humid weather in the summer. What else comes to mind? Land transfer taxes are great, provincial sales tax is great, lack of decent public transit is great, lack of dedicated paved bike paths is great, lack of decent restaurants is great, and the many tiny, congested, pot-hole filled roads are great. In summary I find Ottawa to be a rather sub-standard "city" to live in. I've lived here 5 years and still can't wait to move back West.

I do appreciate your posts on how ridiculous the greenbelt is though, I fully agree with that.

12:06 AM  

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