Faith, Time and Questions

Recently I’ve had several very worried people ask me what my take is on the Ottawa housing market. There have been some seriously scary stories in the news lately and the fear is spreading like a bad flu. It’s scary for all of us to think that maybe our largest asset is not as valuable as we think it is. I thought I’d take this opportunity to address some common questions that are being asked lately.

1. Is the housing market crashing in Ottawa?
I would like to start this one with a “NO”. Sometimes I feel like standing up on the roof tops and screaming it so everyone can hear me. Ottawa is an extremely conservative town. We have only minor decreases, which does not happen often. As such we also do not experience the staggering increases that you see happening in places like Toronto. So I may not be an economist but if you have a large bubble that bursts, then you need to make sure that the bubble grows large in the first place. In Ottawa our bubble never gets that large, so the bubble does not have such a catastrophic “pop” when it does burst.

2.Interest rates are going to go crazy soon, aren’t they?
I have a very simple answer to this. Banks put a lot of money into trying to identify market and economic trends. It’s in their best interest to try to look into their crystal balls and see the future. Although I am sure that they wish they could really see the future, they can be a good barometer for the rest of us . If you take a look at 3 year rates they are pretty low right now. At the time of this writing they are around 2.54%, 5 year rates aren’t that much different. Now look at the 10 year rate. The banks are asking 3.69% right now on average again. So in layman’s terms this means that the banks are expecting that the interest rates will be somewhere around this amount in 10 years from now. Looking at that it’s pretty obvious that if the banks don’t expect the rates to go crazy, then why should we?

3. DND and RCMP are moving out of Orleans. It’s going to destroy the values there, and they won’t recover.
Yes unfortunately DND and the RCMP are both moving away from Orleans. Yes there are people moving out and not as many people moving back in. While there has been a decline in the area let’s look at Kanata and the infamous “tech bubble bursting”. Initially there were some declines but those stabilized and the market became healthy again and this recovery did not take very long at all. By 2004 we were seeing increases of around 4.5%. All of this being said we can use the past to predict the future. So I think that though there has been a “dip” in the Orleans market there will not be massive losses, also most importantly there will be a recovery and a return to a healthy market.

Anyone buying a home and expecting to stay there for over 5 years will be in a good position. The most important thing to take away from all of this is there is never something that is not recoverable. The economy will fix itself. If the Russian economy could come back after bread costing 1,000,000.00 Rubles, then I think the economy in Ottawa can recover from most things as well. All it will take is little faith, and time.

 

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