House Sales Set Record for April

House sales set record for April


Insiders predict busy May, June with rate hikes, HST on horizon

By Robert Bostelaar, The Ottawa Citizen May 6, 2010 OTTAWA — Ziad and Lena Debline paid $525,000 last month for a four-bedroom bungalow on a big lot in the leafy Cambrian Heights neighbourhood near Ottawa's east boundary.



With low-rate financing locked in for five years and the prospect of Ottawa real estate prices going up each week they waited, they felt they got a good deal.



"I don't think we overpaid -- the house deserves the price," said Ziad, who operates a landscaping and construction company.



Theirs was one of 1,841 transactions in a record April for the Ottawa Real Estate Board, which saw residential sales jump 15.7 per cent from a relatively flat April 2009.



Demand pushed the average sale price, from condominiums to mansions, to $332,979, an increase of 11.6 per cent from a year earlier.



Industry participants say May and June could be equally hot as buyers try to get in ahead of further interest hikes and Ontario's looming harmonized sales tax.



"It's anybody's guess if it's going to slow down," said Roch St-Georges, the HomeLife Capital Realty representative who worked with the Deblines. Would-be buyers "are getting frustrated," he said. "I'm losing a lot of deals on multiple offers."



For many buyers, time is ticking on "pre-approved" mortgages at rates that fell to historic lows in the recession. Borrowing costs began moving up in April in anticipation of Bank of Canada rate increases in June or July, even as mortgage lending rules were tightened to discourage defaults.



Dave Farquhar of Royal LePage Team Realty said some buyers hold approval for five-year mortgages at 3.69 per cent, compared to the 4.25 per cent on offer now.



"A lot of people are being driven into the market, and making their decisions earlier, because they realize they are up against this interest rate change," he said.



The pending harmonized sales tax also appears to be motivating some buyers and sellers to close deals before it kicks in on July 1.



The 13-per-cent HST will not be applied to the purchase price of resale homes, but is expected to boost the cost of associated services, from real estate commissions to legal fees and home inspections.



Real estate board president Pierre de Varennes said the tax and interest rates are having an effect, but April's record total "also demonstrates that consumers feel confident about our local economy."



He continues to predict a return to a balanced Ottawa real estate market in the second part of 2010 as more listings become available.



Across Canada, a housing forecast issued Wednesday by TD Economics calls for house sales to cool off quickly in the second half, and prices to decline by an average 2.7 per cent next year.



TD said housing prices in Canada are currently overvalued by about 15 per cent, based on longer-term economic factors such as income growth. That gap should narrow to 10 per cent by the end of next year, it said.



As one of the country's most stable markets, however, it's likely Ottawa prices are less overvalued. And with unemployment low and the city's population increasing, the market should stay healthy, said de Varennes.



"Close to 60 years of history would tell you that the Ottawa market doesn't recoil as you might see in Calgary or Vancouver or Edmonton. As we build, it's usually done on a very solid foundation."



Farquhar said any public service layoffs that could be part of government spending cuts are the biggest threat to Ottawa real estate values. Even so, the market was able to absorb the effects in previous rounds of cuts.

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