A tight housing supply, compounded by demands from a rising population, has made Ottawa’s residential real estate market one of the most active and important to watch in the coming year, according to a report released Thursday from PwC.

The report, which primarily examined cities’ housing sectors, ranked Ottawa third of 10 real estate markets to watch in Canada next year, just behind the housing hotbeds of Vancouver and Toronto.

The professional services firm notes that Ottawa’s relatively affordable housing sector has made it an attractive migration destination from neighbouring markets such as Toronto – a feature that recently helped the capital surpass one million residents.

But the city’s growing population is putting demand on the inventory of housing units. PwC said it expects the local market’s supply shortages to persist, and noted that a lack of available land for development is pushing builders to construct townhomes rather than new single-detached properties.

The PwC report noted that rental developments are “going strong” in the city as rising home prices push prospective buyers into alternative options.

The report also highlighted Ottawa’s industrial sector as a strength of the city’s commercial real estate market.