Buying a home is probably the largest purchase a person will make in a lifetime. The Covid-19 pandemic has made an already difficult decision even more complicated. Ottawa housing prices are up almost 31% year over year. To get some perspective on what lies ahead for both the residential and commercial real estate market in Ottawa and the surrounding area, we spoke with Rocco Manfredi, of Royal Lepage Team Realty Brokerage, who has over 33 years of experience in the industry.
Residential Housing Demand will Remain Strong
In terms of housing, Mr. Manfredi sees demand remaining strong for 2021 in the Ottawa area, possibly cooling down somewhat in 2022. “It all depends on interest rates. Right now, they are extremely low, and unless we move to negative interest rates – which I highly doubt will happen – we should see interest rates start to climb by the Fall or the end of the year.”
But Manfredi does not expect any big price swings locally that we have seen happen in red-hot markets like Toronto or Vancouver. “Ottawa is more stable. We are more conservative and the housing market is safer. Governments, universities, and other public institutions, like hospitals, are major employers. So we don’t see some of the huge swings that happen elsewhere.”
Housing Supply is Tight
“Another real driver in the Ottawa market is lack of supply.” There was a 38% supply shortage in February 2021 compared to October 2020.
“I have clients with $500,000-$600,000 budgets who are willing to move outside of Ottawa to places like Carleton Place, Kemptville, Arnprior, or Almonte, and they still can’t find anything to buy.”
Manfredi looks at the housing market from a very fundamental perspective. “To build a new home, you need land, materials, and labour. Right now, all are in short supply, whether because of Covid-19 or because of other reasons. Even the big builders are selling off only four or five homes at a time due to changing prices in materials and market conditions. The market has been changing very quickly and they can’t even keep track of “ normal” pricing in this market. For example, lumber prices are sky-high, you can’t get tin for HVAC systems, and you are lucky if you can get enough tradespeople to do the work.”
Is This a Good Time to Sell Your Home?
We asked Manfredi if this might be a good time to sell before prices stabilize or turn down. Prices in Ottawa actually were down 0.5% in February 2021 compared to January 2021. Manfredi said quite directly, “only if you have a Plan B. I see too many people who are in the market for the wrong reasons, some trying to turn a quick profit. Often, they sell a perfectly good home and buy another one that is overpriced in hopes of making further gains. In the end, they are actually holding a property that may have less value.”
“If you are downsizing or moving to take a new job or something like that, by all means, put your house up for sale. But like the stock market, prices can go both ways. In my experience, we see a correction every eight to ten years. I always say that history repeats itself.”
Commercial Market is More Uncertain
Turning to commercial properties, Manfredi is a bit less optimistic. “Covid-19 has changed a lot of things – like more people working at home or ordering in goods and services. No doubt there will be some commercial casualties, but the stronger businesses and the stronger landlords will survive.”
“We will probably have higher office vacancies until things normalize. We may also see some different office layouts – more space per person. But I think a lot of people, who liked working at home, are ready to go back.”
Manfredi noted that a lot of smaller commercial properties, like strip malls, are for sale, “but the prices are not cheap. Some big guys may come in to buy others who are over-financed or heavily leveraged. But the market will come back, probably by the end of 2022 or early 2023.”
Tax Implications for Buying and Selling Property
When we asked about tax implications for buyers and sellers, Manfredi said, “I buy and sell properties. I don’t give tax advice. Everybody’s situation is different. I tell my clients to get the right tax lawyer, the right accountant, the right building inspector, the right property assessor – don’t do it on your own. Go to a professional.”
We asked Rocco Manfredi if he had any parting advice for potential real estate buyers or sellers. Manfredi said, “I see a lot of people right now who are interested in real estate, but they have no idea what they’re doing. Real estate is not a game – it is a serious business. If you have a legitimate need to buy or sell a property, by all means, do so. If not, leave it to the professionals.”
Sound advice from someone who has seen a number of real estate cycles in his career.