Condos and Freehold Homes - is the gap between them growing?

Mar 16

House prices are on the rise in Ottawa; this is not a surprise to anyone! But have you considered the different ways in which property prices are rising - and the reason behind them?

Our agent Mitch MacKenzie took the time to run the data and compare 6 types of homes in the Ottawa area over the past 5 years. Then, he compared the gaps between each type to see where buyers are migrating to, and how much they’re willing to spend.

First and foremost, let’s look at all the numbers together.

Mitch explains that each column has the average year-to-date price of that type of home in Ottawa. This accounts for lower-sale months (like the winter and summer) and higher-sale months. Spring and fall are typically the hotter seasons to create an overall average for the entire year.

You can see that each type of home has had a huge increase in price over the past 5 years - all over 20%. But certain types of homes have become considerably more expensive than others. Consider the price difference in condo apartments over 5 years (from $301k to $419k) compared to the price difference in fully detached homes ($451k to $770k).

Why did this happen?

Mitch explains that in 2017, 2018, and 2019 detached, semi-detached, and even townhomes were highly desirable as they were closely priced to standard condos. Mitch explains “they were more desirable because instead of purchasing a condo, buyers shopping in 2017 could choose a townhome for on average $40,000 more and get more house. Most buyers want more house whenever possible - and if the prices are comparable, they are more likely to choose something like a full home with a yard than a condo apartment.”

But because of affordability in Ottawa and supply issues over the past few years, the price of freehold properties homes began to rise. Which, in result, will put massive pressure on the condo market

Next, Mitch has broken down the data to compare each type of home, and calculated the percentage gap between each. Each of the following data tables compares a condo-style home with a freehold home.

Comparing condo apartments with detached homes, two opposite ends of the spectrum, will illustrate that the gap between their average prices rose from 50% to 83% in the last 5 years! Mitch has also calculated the growth in their individual prices. Condo Apartments raised their prices an average of 28%, while detached home prices elevated 41%. This is another excellent way to see where buyers are headed in the future.

The most significant growth in price over the past five years was seen in condo townhomes - why?

Mitch explains that this is because it is the closest thing to a townhome in terms of size - but rings in at a lower price than a semi-detached home or freehold townhome. Because of this, people with pre-approvals under $600,000 that want the space of a townhome will have to settle with an older, smaller townhome with a condo fee - so the prices for them will continue to rise, especially as anything of a similar style that doesn’t have a condo fee will continue to have a much higher price point.

Comparing Condo-Townhomes (and stacked condos, to a lesser degree) to freehold properties, we can see that their gap percentages are actually on a downward trend, meaning that these types of condos are actually increasing in value and catching up to freehold properties.

We’re already noticing high demand in condo apartments in 2022… in Jan/Feb 2022, vs Jan/Feb 2021, the average price is up for one-bed condos by $35,000… and selling 14 days faster. It will be interesting to see in the coming years how these prices adjust!