Much of Ottawa's condominium market is reaching the saturation point and is entering into a period of decline, warn market watchers, bad news for area builders still trying to capitalize on the whims of homebuyers.

While a number of builders in the area have condo projects on the drawing board or in the construction phase, Barry Nabatian, general manager of Market Research Corp., says condo popularity is cyclical and it seems to be entering a natural decline.

"On the city-wide level, we are more or less reaching the saturation level, but in the greater downtown area I think we have reached or exceeded saturation," he says. "Many condos have been built and several more proposed, such as Claridge's Rideau Street two-tower project. Sales are beginning to slow down when compared with last year's numbers and that's because there are just too many of them."

Across the city – from Kanata to Orleans – there are almost 20 condo projects under construction or in the planning phase. In the downtown area, Claridge Homes is completing construction on 700 Sussex Dr. and is in the development stage of its twin tower project at 200 Rideau St., which will include three floors of commercial space. Canril Corp. has also started construction on nearby 90 George St. for a 19-storey unit with a three-storey commercial pod.

On Wellington Street, Windmill Developments is about to begin construction on The Currents, a "green" project with 43 units and new home to the Great Canadian Theatre Company.

Richcraft also has a number of condos in the works, including Place des Governors, at the corner of Ogilvie Road and the Aviation Parkway. This development is being billed as Ottawa's "first master-planned community" and specs show 17 buildings housing 1,350 suites on 20 acres of land.

According to the statistics for the first half of 2005, the average price in Ottawa for a condo/apartment is $197,500, says Christian Douchant, Canada Mortgage and Housing Corp.'s senior market analyst for Ottawa. He says this price represents an increase of five per cent from last year, while all single detached homes, townhomes and bungalows have increased in price by 3.6 per cent.

"Condo sales are down and what seems to be happening in the marketplace is it's starting to become a little restricted. When we look at the sales to new listings ratio, it's clearly showing the condo market is more in a seller's market. So, we would expect a stronger price appreciation," he says.

However, Mr. Douchant says that while the demand isn't as robust and sales are down overall, in terms of price load condos are still outperforming the other markets.

Mr. Nabatian points out that condos have become quite popular with both retirees and career couples.

"The retirement age group don't want the hassle of snow removal and grass cutting, so it's a matter of convenience and many are also snowbirds who head to Arizona or Florida in the winter," he says. "The downtown condos reflect the needs of the single couples who want the action and busy lifestyle. In the last four to five years, there has also been an increase in the number of people working in the government industry who want to live downtown."

That kind of demand has helped sustain the condo market as evidence mounts that the entire residential market in Ottawa is cooling off fast after years of heady growth as supply catches up with demand.

Last week, CMHC said it has lowered its forecast for housing starts in Ottawa this year, and predicts a further decline in 2006. Slightly more than 5,000 new homes are expected to be built this year, down 30 per cent from the 7,243 built in 2004. Resales of existing homes are expected to decline by 6.4 per cent this year to 12,600 from the record level of 13,457 in 2004. The average price of a resale home is expected to rise about four per cent this year, less than half the increase seen in 2004.

Mr. Nabatian says it's important to remember the vast majority of residential land in Ottawa is owned by only a handful of developers who are more interested in the additional profit created by single-family homes and row houses.

"Condos have had a great run the last three to four years, but it seems to be cooling off a bit because it's all cyclical," he adds. "After this year and next year, or possibly the year after that, we won't see too many more for a while."

By Kristin Harold

kristin.harold@transcontinental.ca