Brigil's upscale Domaine du Vieux-Port development in Gatineau. (image supplied)

The grass may not be greener in Gatineau, but it's still a bargain ... relatively speaking

New-home buyers are saving huge sums by choosing to live across the Ottawa River in Gatineau, rather than in Ottawa.

And the price gap is widening – thanks to the lower cost of land and far lower development charges in Gatineau, homebuilders on both sides of the river say.

Not surprisingly, growing numbers of people are deciding it's worth paying the higher income taxes endured by those living in Quebec, compared with Ontario provincial tax rates.

Taking into account home prices and other factors – such as mortgage costs, income and property taxes, health insurance premiums, child-care benefits and day-care rates – the savings of living in Gatineau can add up to thousands of dollars a year, compared with living costs in Ottawa.

But, tax experts caution, the savings possible by living in Quebec depend on an individual's circumstances. (See accompanying story on the factors that can help you decide whether it's worth moving to Quebec.)

On average, the cost of a new, single-family home is now almost $177,000 less in Gatineau than in Ottawa, according to latest data from the Canada Mortgage and Housing Corporation (CMHC).

In the first six months of this year, the average price of a new single-family home in Gatineau was $222,454. The average price of a new home in Ottawa was a whopping 80 per cent more – $399,325.

That's a price gap of $176,871, slightly wider than in 2006, when it was $173,354.

New home prices have climbed at about the same rate in both Ottawa and Gatineau so far this year. In the latter part of 2006, the average cost of a new home in Gatineau was $212,375, while in Ottawa it was $385,729.

Pascal-Yvan Pelletier is a senior analyst with CMHC, the federal agency that tracks housing costs and trends. He cautions against reading too much into the huge difference in average new-home prices between Ottawa and Gatineau.

It could be, says Mr. Pelletier, that the average new home built in Ottawa is larger than the average new home built in Gatineau. The CMHC does not keep data on the average size of new homes.

Mr. Pelletier says he has "the impression" that new homes are typically larger on the Ottawa side of the river. "At least, I hope new home buyers in Ottawa are getting something extra for all that extra money they are paying."

It's not just in new homes where prices are substantially lower in Gatineau than in Ottawa.

The average price of a resale home is more than $90,000 cheaper in Gatineau than in Ottawa, according to multiple listing service sales in the two cities, which together form the bulk of the National Capital Region.

In the second three months of this year, the average price of a resale home was $181,283 in Gatineau and $277,647 in Ottawa – a difference of $96,364.

In the latter part of 2006, MLS sales in Gatineau averaged $163,539, while in Ottawa the average was $257,481 – a difference of $93,942.

Mr. Pelletier said he's noticed a trend of people moving from Ottawa to Gatineau in recent years. While income taxes are higher in Quebec, he says he believes people are attracted by lower housing costs and other factors, such as potential savings in day-care costs.

John Herbert, executive director of the Ottawa-Carleton Home Builders Association, blames the City of Ottawa for the fact that new homes are "significantly less expensive" in Gatineau than Ottawa.

For a start, says Mr. Herbert, the City of Ottawa imposes substantial development charges on every new home built in the city. These charges are usually between $25,000 and $30,000.

"Every city in Ontario tries to get as much as it possibly can from these charges," Mr. Herbert says. "The charges rise automatically with inflation every year. Then, every five years, the city reviews these charges, and adds to them rather dramatically. The charges are a huge bone of contention with the home-building industry.

"These development charges put new housing out of the reach of many families and are very discriminatory."

The City of Ottawa maintains that the development charges are required to pay for city services to new housing subdivisions. In Quebec, most of these costs are paid from taxes.

"There is no lobby group for new-home buyers," says Mr. Herbert, by way of explanation for the steep increases in development charges by the City of Ottawa.

But the price gap between Ottawa and Gatineau is also due to the City of Ottawa's policy on growth, says Mr. Herbert, which favours densification to limit urban sprawl.

This policy is artificially pushing up the price of land for residential development in the city, he says. "The city has a policy of smart growth, but it's really a policy of dumb growth."

By restricting areas where residential development is permitted, the city is curbing the supply, he says. "There is a much greater supply of land for residential development in Gatineau."

Carl Martin, marketing director for Brigil Homes, which has several residential developments on both sides of the Ottawa River, says buyers typically save about $100,000 by purchasing in Gatineau rather than in Ottawa. "That is, for a house of the same size."

Benoit Mottard, executive director of the West Quebec office of the Quebec Home Builders Association, also estimates a new-home buyer can save about $100,000 by buying in Gatineau rather than in Ottawa.

Cheaper land costs represent the biggest saving, he says. "In Gatineau, a piece of land for a typical-sized new home might cost $50,000, whereas in Ottawa it could be double that."

Sales taxes are almost the same on new homes in Ottawa and Gatineau.

While new-home buyers in Ottawa usually pay between $25,000 and $30,000 in development charges, buyers in Gatineau may pay just $2,000, or even less, in something called a local improvement tax imposed by the City of Gatineau.

Normand Gagne, sales director of Brigil's luxury new-home development, Domaine du Vieux-Port on the Gatineau River, says he believes the savings in buying in Gatineau can be significantly greater than $100,000. He recently sold one of Brigil's most expensive models, with lots of upgrades, for slightly more than $900,000. "That house could easily have cost $1.3 million, or even more, in a comparable location in Ottawa," he said.

By Michael Prentice

Special to the Ottawa Business Journal