Is Ottawa’s Real Estate Market Under Valued

Is Ottawa’s Real Estate Market Under Valued
By Dave Williams

The recent media attention on Ottawa’s fading glory days of unprecedented real estate growth go us talking over at the Keller Williams office in Ottawa, and somebody (Bill Meyer) asked the question….

Is there a new normal in Ottawa real estate?

What was/is the normal in Ottawa real estate?

The average price of a home sold in Ottawa in 1958 was $15,564.  It has risen by 6.18% per year (on average) since then.

The average price of a home sold in Ottawa in 1958 was $15,564. It has risen by 6.18% per year (on average) since then.

So we did a little research and number crunching, the Ottawa Real Estate Board has yearly sales and prices going back to 1958.  When you average out the increases and decrease in prices since 1958 the Ottawa real estate market has risen by 6.18% per year on average.

Now we have a trend, 6.18% a year.

So when we raise the average price of a home by 6,18% since 1958’s $15,564 we end up with a trend that put the theoretical market at $396,669…$44,877 higher than it actually is.

Could Ottawa’s real estate market be under valued?

Or is there a new “normal”?

Taking a look at this chart we can see that in 1995 the average price dips below the trend line…and never rise back above it.  Which is not very surprising, in the 1980’s between government hiring freezes and 12% to 20%+ interest rates real estate in Ottawa had a tough run and home owners learned to be a little more cautious, a little more conservative and stayed in their homes a little longer to build some equity.

From 1995 to 2000 you can see the growth was fairly flat, beginning to rise again by 2005.

In 1995 the average price of a home was $143,193.  It has more than doubled since then, in 2012 the average price of a home was $351,792

In 1995 the average price of a home was $143,193. It has more than doubled since then, in 2012 the average price of a home was $351,792

Let’s zoom in on the last 17 years.

Since 1995 the average change in real estate prices has been +4.75% per year, a much slower pace than we saw look at the last 58 years.

Both the 6.18% trend line and 4.75% trend line are shown on this graph with our actual average home price wavering in between.

The telling aspect here is post 1995 and a turbulent ten years we see a period of very slow growth for 6 to 7 years as consumer confidence in Ottawa’s real estate market is renewed and by 2002 growth begins to gain traction.

Over the last 10 Years (2002 to 2012) housing prices have risen on average by 6.55% yearly.  Compared to a 17 year trend of 4.75% and 54 year trend of 6.18% we've had exceptional growth recently.

Over the last 10 Years (2002 to 2012) housing prices have risen on average by 6.55% yearly. Compared to a 17 year trend of 4.75% and 54 year trend of 6.18% we’ve had exceptional growth recently.

Zooming in again to 2002 to 2012 we see that there was an exceptional spike in housing price growth in Ottawa.  Over the last 10 years the the average housing price increase has been 6.55%.  Well ahead of the 54 year and 17 year trends.

Will it keep doing what it has in the past or are we in for something new.  <Stay on top of the Ottawa real estate market> What are your thoughts, will we continue to see the grand growth of the past ten years or is this a shifting point?

What is Ottawa’s new norm in real estate prices?

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