Ottawa's housing market getting out of reach for many first-time buyers

Ottawa's soaring real estate market is getting even further out of reach for first-time buyers. Low supply, multiple offers, and now higher borrowing costs means even getting a townhome could cost thousands of dollars a month in mortgage payments.

Megahn Kernohan has been trying to buy a house for months.

“I had hoped with what I have, that it could happen right now,” said Kernohan.

Meghan Kernohan searching for real estate online. (Supplied by Kernohan)

What she has is an approval of $500,000, yet she is still struggling to find something that fits her budget.

“Currently I’m paying about $1,682 a month in rent,” says Kernohan. “And I honestly feel like I’m building someone else’s equity.”

With housing prices continuing to hit record highs, it is squeezing many out of becoming homeowners. Kernohan is discouraged at what she has to deal with.

“Should I even try?” asks Kernohan. “Should I fall in love with this place? Should I put myself out there? Am I going to get it?”

Interest rates have been historically low in the past two years but unfortunately for those looking to buy, rates have already starting going back up.

Meghan Kernohan searching for real estate online. (Supplied by Kernohan)

“What we experienced during the pandemic are by far the lowest rates that we’ve ever encountered,” says mortgage agent Frank Napolitano. “A year ago, you could get a five-year mortgage in the one-and-a-half, to one-and-three-quarter per cent range. Today, we’re trending really close to normal when it comes to fixed mortgage rates.”

Just two years ago, you could get a townhouse for $500,000 with a monthly mortgage payment of about $2,000.

Today, that same townhouse sells for $650,000. Add the higher interest rate and you're now looking at almost $3,000 per month.

Karen McClintock is a real estate advisor with Engel & Völkers. She says prices in Ottawa might be higher than in years past, but this is now the new normal and it’s unlikely prices will ever go back down.

“These houses are not inflated prices and it’s not going to crash. What’s happening is basically, the true price value is starting to actualize,” says McClintock. “I’ve seen properties that are very similar. Priced at $599,000, $699,000 and at $799,000 and they all tend to sell at the same price.”

McClintock also says a common issue she sees is sellers pricing their homes below market value, causing a frenzy of bids at the low end, resulting in a bidding war.

“If a house is listed at $499,000 when really it probably will sell close to $700,000, they shouldn’t be pricing it at $499,000 because there’s a lot of people with broken hearts after that.”

For Kernohan, she says she will continue to hunt for her dream home, but she’s worried that the opportunity might never come.

“I’m single. I’m a small business owner. I make a good living. I have great credit,” says Kernohan. “I have all the things that really, as I grew up, say I should be able to just go and get the house of my dreams. But despite having all those things, that’s not the reality.”