It’s no secret we saw some wild records being set from 2019 through 2021, but 2022 was definitely the year things started to slow down. 

To be clear: the overall real estate market in Ottawa was still up 7% on average in 2022 compared to 2021. 

This means our real estate market is still in a great place, but 2022 did see the shift from the fast, sellers’ market of the early pandemic years to a more balanced market.

While a lot of articles and voices in real estate or media focus on this year to year growth, we want to give you more insights on what that looks like from a month-to-month basis and for buyers or sellers asking questions like: “How will this affect me now?”

The main reason we saw the market cool off across May through December in 2022 is the rising interest rates (think: interest rate hikes you kept hearing about which essentially end up lowering most buyers’ budget), and an increase in supply, which essentially means more sellers listing their homes. 

Since 2020 through the start of 2022 were incredibly hot, it’s not surprising to see the increase in listings appear as sellers get nervous when the heat slows down and they want to sell their homes before it gets too cool. 

This ends up leading to a slow down in the number of homes sold, as there are less buyers, lower budgets, and more listings, meaning we return to a market with conditional offers and a less ridiculously competitive space.

Let’s take a look back at how that played out through the year and what it means for you now.

A strong start to the year: January – March 2022

January kept up the sellers’ market we experienced all throughout 2021, with the price of homes increasing for the 5th month in a row from what we saw in just the month prior, December 2021 by $52,000 or 7.2% to $771,000 for residential (freehold) properties.

February kept up the hot streak of increased prices and a great time for sellers. While the average residential sale in January was $771,000, in February we saw that drastically jump to $837,000, an 8.5% increase.

March brought better news for buyers, despite the fact that the average residential sale still increased. This increase was just 1.9% from February’s averages, going from $837,000 to $853,000 ($466,000 vs $479,000 for condos, 2.7% increase versus the 4.2% increase from January to February). 

In other words, March gave us a glimpse that the market might be balancing out more soon.

Why? March 2022 was when the Bank of Canada first increased their rate by 0.25%, making it 0.5% as the overnight rate (this is the rate large banks use).

Curious about the monthly comparison from 2021 to these 2022 figures? 

Here’s a breakdown of the numbers in the first quarter of 2022:

January

• Avg. Residential price was $771,000; up 14% from January 2021
• Avg. Condo price was $447,000; up 18% from last January

February

• Avg. Residential price was $837,000; up 17% from February 2021
• Avg. Condo price was $466,000; up 15% from last February

March

• Avg. Residential price was $853,000; up 13% from March 2021
• Avg. Condo price was $479,000; up 10% from last March

The beginning of the shift: Spring real estate

The spring market represented the start of the market balancing.

Why?

From April to June, the Bank of Canada actually announced two rate increases.

Practically back-to-back with the March announcement, the Bank of Canada raised interest rates by 0.5%, landing at a rate of 1%. 

How did that affect April sales?

Between the rising interest rates and buyer uncertainty, the number of homes sold in April dropped 22% versus the previous year. This drop was proof buyers put the brakes on the search due to the rising interest rates, slowing down demand as a result.

The average sale price for residential homes in April was $812,000. This is still 12% higher than the previous April, showing overall market growth, but actually a 4.5% decrease from what we saw in March.

This was the first month-to-month drop we saw since July 2021 ending an 8 month increase streak.

This trend continued into May, traditionally the busiest month for real estate. In fact, the number of homes sold were down double digits at a whopping 19% versus May 2021.

In June, the Bank of Canada announced yet another rate hike of 0.5%, making the interest rate most banks use 1.5%. This month set the tone for an even bigger shift coming in summer real estate.

Conditional offers make a comeback: Summer 2022

The summer months were characterized by shifting conditions and the return to a more balanced market.

We saw an increase in supply and the return of conditional offers, which gave buyers more choice, extra time and an additional level of comfort before committing to one of the biggest financial decisions in their life. 

The total number of homes sold were down anywhere from 27% to 35% across June through August when compared to the same time last summer.  

Below you can see how the year-to-year comparison of number of homes sold continued to drop through 2022:

• April 2022: dropped 22% vs April 2021
• May 2022: dropped 19% vs May 2021
• June 2022: dropped 29% vs June 2021
• July 2022: dropped 35% vs July 2021
• August 2022: dropped 27% vs August 2021

August also marked the fourth straight month of a decrease in home prices in both freehold and condo homes.

Closing out the year cozy & quieter: Fall & Winter 2022

If you live in Ottawa or follow the real estate market news, you won’t be surprised to hear this balancing continued. The fall & late winter of 2022 can be categorized as quieter and slower overall when we look at transactions going on.

Here’s a brief summary of the decrease we continued to see when comparing to the number of homes sold in the year prior:

• September 2022: 33% decrease from previous year # of sales 
• October 2022: 41% decrease from October 2021
• November 2022: 42% decrease from November 2021
• December 2022: 30% decrease from December 2021

Realistically, 30-42% are massive numbers we’re looking at! So why these big decreases? 

Bank of Canada had three major interest rate announcements from September through December…and yup, you guessed it! They were all increases.

• 0.75% increase; making the overnight rate 3.25% (early Sept)
• 0.5% increase; making the overnight rate 3.75% (end of Oct)
• 0.5% increase; making the overnight rate 4.25% (early Dec)

Most sources attribute this continue interest rate to the Bank of Canada attempting to cool the inflation experienced in Canada at this time. 

While you may not love hearing this, the Bank of Canada also has a planned interest rate announcement for January 2023, which many are saying will be likely another increase.

2022 in Review: The Recap

Overall, the market slowdown was compounded by persistent Bank of Canada interest rate hikes, buyer hesitancy and loss in purchasing power, especially for first-time home buyers. 

In contrast, the rental market saw a significant increase in activity: both in number of transactions and in prices. This is because some of those buyers decided to just rent for a year and see where the market ends up instead of buying. 

Historically, the Ottawa market has been relatively stable and despite significant price increases over the last couple of years, it’s still regarded as more affordable compared to Toronto and Vancouver. 

With a large number of homes in Ottawa still under $1 million, most buyers are eligible for a minimum downpayment between 5% and 10%, which is especially helpful to first-time homebuyers. 

While interest rates have made the cost of borrowing higher, the decrease in prices is working to the advantage of buyers who now can purchase a home with less down payment, have the opportunity to build equity faster, and refinance more easily down the road. 

On the sellers’ side, while the increase in their home’s value might have slowed down, the average price of a home in Ottawa in 2022 is still up 7% from 2021.

It’s always a good idea to keep a finger on the pulse of the real estate market, but it’s also okay if this sounds and feels totally overwhelming. Real estate is so contextual to your current situation, despite whatever the market stats are saying. It’s so important to consider all aspects!

Not sure whether you want to buy or sell? Maybe thinking about a plan and feeling uncertain? Reach out to us at team@seyergroup.ca and we’ll help ease the conversation. No pressure necessary.

You can also follow @seyergroup on Instagram to stay up to date with the market in real time.

Please note: The information included in this blog is based on publicly available market information and is an articulated personal opinion which is not to be quoted by Seyer Group directly. While this gives you a glimpse of the market, it is always important to do your own research. Seyer Group is not responsible for any decisions made as a result of the information above. If you’d like to discuss your specific situation, please feel free to reach out to us at team@seyergroup.ca.