There are more condos up for sale in Ottawa than ever before — nearly 50-per-cent more than two years ago — and prices are beginning to drop.
Ron Hu said he thought it made sense to buy a two-bedroom condo with a great view of downtown Ottawa in January, fix it up and flip it for a tidy profit.
"The location is very close to ByWard Market. Excellent night life, restaurants, shopping. So we thought this would be a great investment," he said.
Hu and his wife, a real-estate agent, spent about $40,000 to renovate the unit before putting it up for sale.
Six months later, the couple hasn't received a single written offer.
"It's mind boggling that with all this money spent and the property's not selling, we're going to end up losing money," Hu said.
The couple aren't alone.
'Market isn't quite there yet'
"Everyone got excited about Ottawa having a condo scene similar to Toronto and Vancouver and we've built up accordingly, but the market isn't quite there yet," said Matthew Sachs, a general manager at Urbandale Construction.
Nearly 1,700 condominiums were up for sale in Ottawa in September — up from 1,120 in 2011, according to the Ottawa Real Estate Board — and the surplus has hit some developers hard.
After only selling 30 units, Tega Homes abandoned its sales centre and sold its luxury condo project Rhombus Tower to another developer.
Richcraft Homes has put its Edge Condominiums development on hold and is rebranding it as The Bowery Condominiums with a new sales pitch.
And in Little Italy, one of the tallest proposed condo developments in the city — Claridge Icon — has sold only 10 per cent of its units. The slow sales have caused the developer, Claridge, to redesign some of the units to make them smaller and cheaper.
"I think it's a story really of developers maybe being a bit aggressive in the pace of construction and the demographics at this point just don't warrant it," said Ben Rabidoux, a market analyst.
Developers offering incentives
99 Parkdale is giving away free parking spaces worth $30,000 with its condos. SoHo is offering a year without condominium fees at one of its developments and Urban Capital gave away free electric bikes.
"In a market like this people do shop around," said Urban Capital saleswoman Karolina Craig. "So added value to their purchase is definitely something people are looking for."
For 10 years, condominium prices in Ottawa had enjoyed steady growth. They rose by an average of five-and-a-half per cent every year, and sometimes as much as 10 per cent in a single year.
But this year, condo prices have dropped by more than two per cent so far.
"So the condo market has been very good, so to see it down by 2.2, it doesn't sound like a lot but it does go to show that there is a high inventory out there. There is a lot of supply," said Josh Cimon, a manager at Paul Rushforth Real Estate.
'Not going to see the same rate of development'
The incoming president of the Ottawa Real Estate Board said the rate of development will begin to slow down.
"I think what we're going to see moving forward is that we're not going to see the same rate of development as we've seen the past few years because we've reached the saturation point," Randy Oickle said.
"Hopefully the developers are smart enough to realize that we can't continue to build at the same rate unless there's market demand."
The Canada Mortgage and Housing Corporation (CMHC) said the market should turn around by next spring if people buy up in anticipation of interest rates edging up.
"All these first-time home buyers who are taking their time will probably jump in the market by then. Then the market will start rolling again," said Sandra Perez Torres, a senior CMHC market analyst.
In the meantime, Ron Hu expects he'll have to drop the price of his condo even more if he wants to sell it.