Tuesday, June 10, 2008

Ottawa's Housing Sector to Tighten in 2009

Construction activity in Ottawa is expected to rise this year, but slower-than-expected economic growth will cause housing starts to drop in 2009.

Total housing starts are expected to increase by 6.1% in 2008 to 6,900 units, with particularly strong activity in the condominium apartment sector, which will reach 1,700 units by the end of 2008. The gain will mitigate the expected drop in the construction of the more costly single-detached units, which are anticipated to drop to 2,750 units from 2,973 a year earlier.

However, sales of existing housing in Ottawa are expected to decline year-over-year by 8.4% to 13,500 units, while the average price growth of a resale home will outpace inflation, rising by more than four per cent to reach $285,000.

The already tight rental vacancy rate is expected to continue its downward trend this year, narrowing further to 2% from 2.3%, fuelling an increase in average rent to $980 from $960.

While the pattern for the rental market is anticipated to extend into 2009, local construction activity is expected to be hit by a province-wide slowdown in housing demand.

A rise in mortgage carrying costs and slower economic conditions will dampen housing demand, particularly among first-time buyers.

However, demand for modestly priced housing will hold up better as declining employment opportunities in higher-paying employment sectors encourage demand for both apartment ownership and rental accommodation.

As a result, housing starts are expected to drop 7.2% to 6,400 units next year, with single-detached housing bearing the brunt of the loss, plunging 9.1% to 2,500 units. Housing sales will drop by roughly 1.9% to an estimated 13,250 units.

Meanwhile, the average price tag for an Ottawa resale home is expected to rise 3.5 % to $295,000, and the rental vacancy rate is forecast to drop to 1.7%, with average rent rising to $1,000.

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