If you’re planning to buy or sell property soon, you probably already know that the frenzied sellers’ market we’ve seen in Ottawa for more than a year is starting to cool.

To combat inflation, the Bank of Canada started raising interest rates in March from the record lows of recent years. More rate hikes are expected in coming months.

With the cost of borrowing increasing, the move has already had an impact on the resale market.

In May, the total number of sales in Ottawa was down 19% from May of 2021 and was slightly below the five-year average for the month.

Average sale prices in May were still above May of last year, but the averages have declined slightly month-to-month, with a 2% decline in May following a 1-3% drop in April, the Ottawa Real Estate Board reported.

If we continue to see fewer people buying, we can expect selling prices to continue to decrease, though by how much remains to be seen.

This doesn’t mean buyers or sellers should panic. There are strategies for buyers and sellers to deal with these trends, and there is also good news in recent sales figures for both buyers and sellers. Here are some tips for navigating the interest rate increases and some good news to keep in mind.

If You’re Buying:

Lock in Your Rate with a Mortgage Pre-Approval: With rising interest rates, it’s important to get a mortgage pre-approval from your lender or mortgage broker.

You will know exactly how much you can spend, you can make an offer with confidence, and you will be guaranteed a specific rate, locked in for up to 120 days as you search for your property. This will protect you from rate increases that occur during your search.

Mortgage Type Makes a Difference: Your lender or broker will explain the differences between variable and fixed-rate mortgages and the pros and cons of each.

Some buyers who are worried about rising rates choose the stability of a fixed-rate mortgage. With this type of mortgage, you know exactly how much your payments and interest rate will be during your term. You don’t have to worry about your payments increasing and affecting your cash flow.

A variable rate mortgage can traditionally mean lower interest rates than with a fixed rate, but payments will usually increase with interest rate increases.

Inquire if your lender offers variable rates with cap rate protection. With this protection, your payments do not rise during your term even if interest rates rise, but the amount of your payment that goes to interest will increase. This appeals to buyers who like to know they will be paying a specific amount for their mortgage and can plan their cash flow accordingly.

Potential Good News: With rising rates deterring some buyers from entering the market, you’ll possibly face less competition for properties and fewer multi-offer situations.

This can also give you more negotiating power with sellers than during the days of a more competitive market.

Ottawa Real Estate Board President Penny Torontow said in May that in addition to the slight decline in average prices in May and April, the months of inventory (the time it would take to sell current inventories at the current pace of sales activity) have increased to 1.2 months for residential-class properties and 1 month for condominiums. We are still a far cry away from a balanced market, but it finally seems to be moving in the right direction,” she said.

Tips if You’re Selling:

Don’t Panic:

Ottawa has been a seller’s market for more than a year, and while the market has started to cool, the recent numbers still favour sellers.

In May, the average number of days that properties were on the market increased from 11 days in May of last year to 14 days in May of 2022. But that’s still well below the 30-to-60 days typical of Ottawa in a more balanced market.

It just means your property may take a little longer to sell than similar properties did at the height of the seller’s market.

As Penny Torontow, President of the Ottawa Real Estate Board recently said, “we don’t want sellers to panic if their homes aren’t selling as quickly as perhaps their neighbours’ properties did.”

Pricing:   Average sale prices in May were down slightly from March and April, but they were still comfortably above where they were in May of 2021.

The average sale price for a condominium-class property in Ottawa in May was $472,920. That’s up 11% from the average price in May of last year.

The average sale price for a residential-class property in May was $802,393. That’s up 8% from the price in May of 2021.