Rental construction growing in Ottawa, but demand still raising prices

Even with the expected population growth to slow in the nation’s capital, Ottawa renters could start seeing a rise in vacancy rates over the next few years, a report from the Canada Mortgage and Housing Corporations says.

The agency’s 2025 outlook details that due to government initiatives and a drop-off in immigration, the city’s population will start to slow down this year and continue to “level off” in the years to come. This will have a small positive impact on the city’s rental vacancy rate.

Combined with the stock already on the market and the slowing demand, it is possible Ottawa’s vacancy rate could be around 2.9 per cent in 2025, a smaller increase than the years before. However, the report notes that this will not have enough impact to bring down rental costs.

According to data from CMHC, the average two-bedroom unit went for $1,880, over last year. This is expected to rise to $1,960 in 2025.

The reason for the higher rents is likely from the arrival of new units that have higher rent prices attached, the report notes.

Ottawa’s house market is “balanced” between buyers and sellers, and with the weak population growth, the properties for sale will be limited in the city. It is believed that as mortgage rates decrease, sales should still grow. Construction is also expected to be stable.

The average home sale price was forecasted to be around $692,400 by the end of last year, an increase from 2023.

This year home sale prices are expected to increase to around $734,000.

Multi-unit projects could slow, in part because of the high number of apartment projects under construction. Many of these are made for the rental market.

Semi-detached or row houses are more affordable in the city, and will not see any decreases, the report predicts.

“We expect housing starts to improve after 2025 in part due to a more favourable regulatory environment,” it notes. “The City of Ottawa is increasingly favouring density, which could accelerate housing starts over the medium and long terms.”