NEWS ANALYSIS
It’s about time Montreal’s real estate market saw some of the excitement that Toronto’s and Vancouver’s have garnered in recent years.The fundamentals of the market are solid: Strong population and job growth—including foreign buyers—combined with dwindling supply are finally moving the needle on price increases. Housing affordability is starting to get worse and bidding wars are popping up. But it’s still a far cry from the craziness seen in Toronto and Vancouver.
Montreal has a lot going for it now and gradual upward momentum in the housing market is quickening.
The Greater Montreal Real Estate Board (GMREB) reported home sales increased in July for their 41st consecutive month, hitting an eight-year high for the month. The median single-family home price rose 6 percent compared to the same month a year ago to $336,250—still much lower than in Canada’s biggest market of Toronto, where the average home price stood at $782,129 in July.
“This new measure will only disqualify a marginal number of potential buyers. Buyers who are able to pay 20 percent or more of a down payment usually have better financial flexibility than those who pay the bare minimum of 5 percent in order to purchase a property,” he wrote in a commentary.
Buyer Frenzy
Sellers on the island of Montreal received bids about $15,000 or 3.5 percent above asking price, said Dominic St-Pierre, senior director for Royal LePage in Quebec.“It’s probably going to get worse before it gets better,” he said.
“Demand is still strong and the inventory is still going down and it’s probably going to continue to go down for another six to nine months before it will stabilize.”
The threat of further interest rate hikes, new listings, and rising new home construction will eventually bring the market more into balance and relieve some pressure on buyers, he said.
Elena Trigiani and her husband, Thomas Poirier, were recently forced to pay 15 percent above asking to come out on top in a war with six other bidders.
“The house in all fairness was priced for a bidding war,” said the 29-year-old soon-to-be first-time mother.
The two-storey house in Pointe-Claire, an island suburb, sold $60,000 over the $400,000 asking price.
The couple braced for battle after seeing lots of friends miss out on homes because they failed to go all-in.
“We knew that we were going to have to be able to react quickly if we knew the house was for us and that’s what we did,” she said.
Sellers Megan Mallette-Di Liello and Patrick Vena reaped the benefits of being on the flip side, receiving an extra $20,000 when they sold their home listed at $735,000 in nearby Beaconsfield.
The parents of two young children knew from friends that there was a possibility of multiple offers but didn’t want to get their hopes up.
“We were definitely satisfied. We didn’t expect that,” she said.
Mallette-Di Liello had heard of sellers who deliberately listed at a low price to create a bidding war.
“That wasn’t our intention. We thought what we listed it at was fair, and so to get over that, we were surprised.”
While Montreal’s real estate market is strong, the degree of over-bidding pales in comparison with Toronto and Vancouver, where some homes attracted scores of bids in their heydays and sold for $100,000 over asking.
The presence of such activity attracts speculative investors who attempt to “flip” homes for a quick profit, something frowned upon by the authorities.
Policy-makers don’t want home prices to rise faster than what the fundamentals of population, job growth, and supply and demand dictate. At varying times in the recent past, parts of the Toronto and Vancouver housing markets were climbing at more than 30 percent annually.
Montreal still has a long way to go before it is deemed unaffordable like Toronto and Vancouver. The share of income a household would need to cover ownership costs is 43.7 percent, whereas it is 74.2 percent in Toronto and 87.8 percent in Vancouver, according to RBC’s housing affordability measure.
Foreign Buyers
Chinese nationals have turned their interest toward Montreal after the Vancouver and Toronto areas introduced a 15 percent foreign buyers tax. According to juwai.com, Canada is the second most popular emigration destination for wealthy Chinese.The interest from Chinese buyers in Montreal grew by 84.5 percent in 2017 and dominates the $112 million of Quebec real estate that attracted views.
Quebec’s unemployment rate of 5.6 percent is slightly below the national average of 5.8 percent and Montreal’s labour force has risen by 27,000 in the last year and 4,300 in the last month, according to Statistics Canada.
For now, the positive price momentum appears to be healthy when compared with what took place in Toronto and Vancouver.
