CMHC 2013 Market Projections Part 1: What Condo Bubble…?

As I sit and write this post from my condo at SOHO Parkway, I count five cranes scattered across the Ottawa skyline and those are only the ones I can see.  To people sitting on the outside looking in, it may seem that Ottawa is headed for a disastrous condo bubble burst, however this just isn’t the case.

Abdul Kargbo, a senior Canada Mortgage and Housing Corporation market analyst explains that while the supply of condo units for sale has been rising since 2001, the percentage of unsold units has remained flat, Kargbo said, indicating that so far, demand is keeping up with condo construction. Despite heated neighbourhood battles over new condo proposals, the number of buildings under construction is actually going down – and that’s a good thing for the market, Kargbo said.

Recently, 2010 was a bumper year for condo construction, with 1,397 units completed. That declined slightly to 1,324 in 2011, and with 948 units completed as of September this year, the numbers are on track for the downward trend to continue. “The growth rate is not going to be as brisk as we’ve seen in the last few years,” Kargbo said, particularly when it comes to prices.

It probably comes as no surprise that the 25 to 34 age group is driving the demand for condos, because condos or townhomes are the only type of housing many of them can afford as first-time homebuyers. Newcomers to Ottawa usually number around 6,000 a year, and they also drive demand. Migration to the city is expected to peak in 2013, with around 9,000 people expected to move here, says Sandra Pérez Torres, another senior market analyst.

Ottawa’s economy will remain relatively strong, despite layoffs in the city’s largest employment sector: the federal public service. “However, uncertainty will keep some potential homebuyers on the sidelines in 2013,” Pérez Torres said.