Ottawa home prices set to decline for first time in nearly 30 years, CMHC warns

A new home is displayed for sale in a new housing development in Ottawa on Tuesday, July 14, 2020. Prospective buyers have lamented the torrid pace Canada's real estate market has moved at in recent years, but many feel 2023 may be the year their luck changes. THE CANADIAN PRESS/Sean Kilpatrick

Ottawa's housing market is set to see the first annual price decrease in nearly 30 years, as rising mortgage rates slow demand for new homes.

The Canada Mortgage and Housing Corporation's housing outlook says housing prices will continue to slow in 2023, and sales will decrease.

According to the report, the average price for a new home in Ottawa will be $640,000 in 2023, down from $691,727 in 2022 and $646,139 in 2021.

"High mortgage rates will continue to be the main reason for slowing demand," the CMHC report says.

"In addition, rising consumer spending has made it harder for households to save up to finance a home purchase."

CMHC says the Ottawa housing market will ease enough to apply downward pressure on prices" in 2023, with the first annual price decrease in nearly 30 years.

"This price correction will be moderate, however. Indeed, since the start of the pandemic, the Ottawa area has seen slower price growth than other major Ontario centres, with the exception of Toronto," CMHC said.

"Despite this decline, prices will still be high, and affordability will remain an issue of concern."

The report says sales will resume growth in 2024 and 2025, shortly after interest rates fall.

"The resulting growth in demand will once again put upward pressure on prices over the rest of the forecast horizon. Growth will be similar to the increases recorded before the pandemic."

CMHC's forecast calls for housing prices to rise to an average of $634,000 in 2024 and $640,000 in 2025.

The report does say housing starts will decrease in Ottawa in 2023 and 2024, due to the rising interest rates slowing demand for homes. 

"High mortgage rates have reduced demand for these types of new units, and their construction has already been slowing for several months," CMHC said. "These conditions will prompt builders to further reduce the pace of construction in 2023."

There were 11,032 housing starts in Ottawa in 2022. The organization predicts 8,500 housing starts in 2023 and 7,800 starts in 2024.