It’s been a whirlwind couple of years in the real estate world and it’s felt like we’ve seen new builds popping up left, right, and center. With the market softening we’re now seeing a definite slowdown in the pre-construction market. 

Why is Ottawa Seeing a Slowdown of Pre-Construction Condo Builds? 

Rising Interest Rates 

Rising interest rates have been a huge culprit in the slowdown of pre-con builds in Ottawa. While we may see home prices falling and the condo market softening, thanks to inflation we are seeing interest rates hiking. The pressure of higher monthly payments for buyers may be a turn off, resulting in this lowered demand. 

When it comes to determining if you will financially be able to handle the fluctuating rise of interest rates, you’ll want to perform a Stress Test. A stress test determines, if based on your financial situation, you’d still be able to pay your mortgage if interest rates increase. Mortgage brokers will use the Stress Test as a factor to determine your mortgage eligibility. As of June 1, 2021, mortgage Stress Test rates increased to 5.25%. 

Check out this Stress Test Calculator to see where you stand. 

Construction Costs 

Construction cost increases have left developers unable to accurately quote and complete projects. Building materials have not been exempt from the recent spike in inflation. Higher material costs coupled with minimal availability on various materials including concrete, steel, glass, and piping has been detrimental to the industry. Not to mention the surge in fuel prices that has heavily pressured increased construction costs.  

Labour Shortage & Strikes 

The pandemic, aging workforce, higher labour costs, and inflation have all exacerbated the labour shortage many contractors are facing. Stat Canada shares, despite high job vacancies in the industry, jobs are not being filled due to pressure on wage increases in the industry. Labour unrest has resulted in many contract renegotiations and has ended in strikes and increased labour costs. 

Supply Chain Delays 

A result from the pandemic, geopolitical environment, skyrocketing fuel costs and a surge in inflation, supply chain delays have heavily impacted new builds. From production delays, driver shortages, increased freight costs and beyond, some developers have had to completely adjust their builds and timeline around these ongoing issues. 

Permit and Project Approval Delays 

Delays in permit and project approvals has brought many pre-constructions builds in Ottawa to a screeching halt. Between building permits, municipal approvals, financing, material price increase approvals, etc., it can feel like one waiting game after another. Many developers have faced timely waits as they navigate the bureaucratic waters needed to get specific permits and approvals to move forward.    

New Builds Gone South

Hintonburg Connection Cancelled: 

Hintonburg’s newest high-rise by Claridge Homes has decided to call it quits! This 30-storey tower planned in the trendy neighbourhood of Hintonburg, has come to a complete halt due to high interest rates, inflation, and the rise of construction costs. With only 20 per cent of the building’s 262 units sold since June 2021, Claridge CFO Neil Malhotra shares that, “The economics are not working…Interest rates have made the costs too high for us to be able to sell the remainder of the units, which is the majority of the building.” Malhotra claims, that in his 20 years, this is the first time the company has had to cancel a project and it is uncharted territory. Based on this we won’t be surprised if we don’t see many builds of this magnitude popping up in Ottawa in the near future. 

Is it a Good Time to Buy? 

To answer the burning question, yes, now could be a very good time for you to buy a pre-construction condo. And we’re going to share why! As always, remember to look at your financial and current situation to determine the best choice for you.  

Why it’s a good time to buy: 

Fewer Buyers 

With the pandemic home-buying rush put behind us, the market has drastically calmed. This calmer market allows buyers a little more breathing room. With fewer buyers, you have time to make your conditions, get that home inspection, and secure your finances. When you’re shopping for a condo with a market of fewer buyers it’s less stressful environment because…

Less Bidding Wars & Less Competition 

Which good news for you means no bidding wars causing the price to skyrocket. Less competition also gives you more time to buy. It isn’t like the Hunger Games of real estate anymore; you don’t have to jump on things as quickly in fear of everything getting snatched up.

Prices are Declining

The rapid spike in pricing we saw during the pandemic has drastically settled. Even with increased interest rates, overall, Ottawa is relatively affordable, especially in comparison to places like Toronto. And with less bidding wars, places are no longer going for way over asking price. The downward pressure of the increased interest rates we’re seeing may actually work in your favour as it has shifted peoples’ budgets and position to buy.  

Get an Assignment Deal 

An assignment sale is when the original purchaser of the property sells to another buyer to take over the rights and obligations of the unit. This is done before the unit is completed. Some of the benefits of an assignment sale include more inventory to choose from at a better price and move into a completed building sooner. With the slowdown the pre-con market Ottawa is facing, investors may be feeling antsy. This could be your golden ticket on snagging a great deal through assignment if investors are looking to sell. Do some research and connect with an agent who specializes in assignment sales to see if this is an option for you.

Check out some of are related articles:

• US Inflation Declines. Can Canada’s Inflation Rate, and mortgage Rates, be far Behind? 
• Assignment Sale 101
• Things to Consider When Buying Pre-Construction