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Are we in a housing bubble? Not really. It just feels like it.

Houses are selling quickly in Ottawa.
Houses are selling quickly in Ottawa.

One of the most enduring myths about the National Capital Region is that our economy is immune from the dramatic ebbs and flows experienced by the country’s other major cities.

It’s not. During the past quarter century we’ve been hit by two dramatic downsizings of the federal government — one in the mid-1990s, the other in the early 2010s. Our economy has also been side-swiped by the telecom crash of 2001 and the collapse in 2009 of the largest private-sector employer, Nortel Networks.

The region has been fortunate in one respect, however. The government and high-tech sectors — which together account for nearly 30 per cent of the total workforce — never shrank in tandem. When government employment fell in the 1990s, high-tech was resurgent. In the wake of Nortel’s collapse and the global financial crisis, the Conservatives padded the government workforce to offset the damage.

Which is why the capital region’s economy gives the impression of calm, despite the frenzy below the surface.

But now something rather odd is happening. The key sectors are all growing at the same time. The result: a jobs boom which, in turn, has been a catalyst for the region’s housing market.

Consider the employment data released Friday by Statistics Canada. The federal agency estimated nearly 800,000 people were working in Ottawa-Gatineau in December, up 62,600 from a year earlier. That’s a gain of 8.5 per cent, the highest among the country’s 33 largest cities but for Brantford, where the job market grew nine per cent. In contrast, employment across the country expanded by just 1.9 per cent over the past year. In another sign of the capital region’s strength, about 80 per cent of the jobs added were full-time.

High-tech accounted for about 4,000 net new jobs while the federal government contributed 16,000 — thus establishing Justin Trudeau’s bone fides as labour friendly. StatCan estimated the federal government employed 160,000 locally in December while the tech sector supported about 43,000 workers directly.

But the latest jobs data suggest these two economic engines are also stimulating hiring more widely. Over the past year the region’s economy has added more than 16,000 professionals who supply technical expertise to federal departments and high-tech firms. This sector employed nearly 80,000 in December. Wholesalers and retailers combined for 14,000 net new hires; hotels and restaurants added 8,400.

Little wonder that, despite a rapidly growing labour force (which includes people looking for work) the capital region’s jobless rate was just 4.4 per cent in December, just above historic lows.

Nor is the employment surge a one-year fluke. The capital region has added 74,100 jobs since December 2016 — up 10.2 per cent, tied for second with Toronto, behind only Barrie.

Plenty of people have been moving to Ottawa and Gatineau to take advantage of the hot job market. StatCan estimates the region’s working age population grew by 25,000 last year.

This, in turn, is fuelling new home construction and the resale market alike.

“Everybody is hiring — government, hospitals, high-tech,” says Bill Meyer, who leads a team of Remax real estate agents. “Students have bought up nearly all the condos,” he adds. “It’s a perfect storm for real estate”.

The Ottawa Real Estate Board last week reported the average price for residential resale properties was $500,000 — up 10.3 per cent year over year. Condos fetched an average $311,000 — a gain of 11.5 per cent.

At first glance these increases don’t look sustainable, given that the region’s economy is growing less than two per cent per year in real terms (after deducting inflation) and that developers have been adding 8,000 to 9,000 new houses, town homes and condos each year, which should help keep a lid on prices through the expanded supply.

However, federal government employment has a disproportionate impact on the housing market, which experienced historically low price gains during the five years leading up to and following Jim Flaherty’s deficit-busting budget in 2012. There’s some catch-up taking place now that government workers and contractors are more comfortable with the Liberals’ spending intentions.

As for all those new houses and condos, the population is growing fast enough to absorb all the new construction, and then some.

Which has led to a squeeze on listings for existing homes.

“The last time we had this few homes for sale was January 2004,” says Meyer. Just 1,800 residential and condo units were being advertised in December, down 33 per cent from a year earlier. This, in a region with more than half a million homes.

“We used to tell people, sell first, then we’ll buy,” says Paul Rushforth, who owns the real estate firm that bears his name. “But now you can’t sell until you find something, and it’s very difficult to find something.”

The shortage of listings has produced what no home buyer wants — seemingly endless bidding wars. Meyer notes his group sold 217 properties last year, roughly two-thirds following a bidding war.

Nevertheless, the market doesn’t appear to have lost its moorings yet, the way real estate did in Toronto and Vancouver in 2015 and 2016. “The market didn’t go crazy last year,” Rushforth says.  “There’s still no appetite for overpriced listings.”

Indeed, the Ottawa Real Estate Board calculated the average gain for the combined residential and condo market last year was 8.4 per cent.  While that was the highest since 2003, it’s nowhere near previous surges experienced in Ottawa. In the late 1960s, 1973-74 and 1983-84, residential and condo prices soared 20 per cent or more.  In 2002, they jumped 14 per cent. No other year since has registered anything close to that.

In short, we’re still some distance from an employment and real estate bubble. But the momentum is certainly building.

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