Royal LePage has lowered its real estate market forecasts in Ottawa by the end of the year as rising interest rates continue to cool the housing market.

The Royal LePage Market Survey expects home prices to increase by 0.5 percent in the fourth quarter of 2021.

In July, the Royal LePage House Price and Market Survey expected home prices to rise by 10 percent in the last quarter.

The total price of a new home will be $743,399 by the end of the year, according to the Royal LePage report.

This represents a decrease of $70,000 from the July forecast of $813,670.

Jason Ralph from Royal LePage Team Realty said, "Despite the drop in home prices over the summer, the Ottawa real estate market is heading towards more stable conditions in the fall with new inventory becoming available."

"We still see strong buyer demand in the area even if it is lower than its historic high levels last year and the insufficient supply to fully shift to a balanced market."

Ralph says that while rising interest rates and inflation have eased competition, properties in the most desirable neighborhoods can produce multiple offer scenarios if priced correctly.

Ralph said, "Although demand is still strong in parts of the area, buyers today are able to be more selective in their purchases and have the opportunity to put conditions in their offers."

"Those who are in a position to buy feel the pressure to make transactions before lending rates rise further."

In the third quarter, the total price of a new home in Ottawa dropped 7 percent to $744,500, from $800,300 in the second quarter.

Home prices in Ottawa fell by 1.1 percent in the second quarter.

In a media statement, Ralph said he expects market activity for the rest of the year, anticipating a return to pre-pandemic seasonal trends in 2023, while supply shortages remain a challenge for buyers.