The median price of a single-family home in Montreal has increased 59 per cent since 2017, with the biggest jumps happening during the pandemic years.
Montreal real estate has been on a hot streak for more than five years now, and the COVID-19 pandemic has only cranked up the temperature. Stay-at-home orders created new needs chez nous, especially for those living in small spaces. At the same time, the pandemic understandably made some would-be sellers hold off on listing their homes. The result? Bidding wars driving up prices to eye-popping new heights.
Will the trend continue in 2022? According to Michaël Simard, a senior economist responsible for market analysis at the Quebec Professional Association of Real Estate Brokers (QPAREB), housing affordability has become a serious concern that may put a cap on how much higher prices can go.
“The price increases that we’ve seen, especially this year (2021), were extremely substantial,” Simard said. “We’re expecting a moderation of those price increases. We are not expecting a decrease in prices — unfortunately for some buyers — because there’s still a lot of pressure in the market, and the supply is still quite low. This is going to continue keeping pressure on prices to some extent.”
The median price of a single-family home in Montreal has increased 59 per cent since 2017, according to QPAREB data, with the biggest jumps in price happening during the pandemic years:
The 2022 prediction? An increase of just one per cent, to a median price of $498,395 for a single-family home in the Montreal region.
Yet COVID remains a wild card that could upend expectations, as it has for the past two years. Before the pandemic hit, QPAREB economists expected the median price of a single-family home in Montreal to rise by six per cent — not 18 per cent. And at the end of 2020, the association forecast 2021 would see a seven per cent increase, not 23 per cent.
“There’s a lot of uncertainty at the moment,” Simard said.
The Bank of Canada is expected to begin raising interest rates in the second or third quarter of the year to counter inflation. Most economists expect these increases to be gradual, so people with variable rate mortgages should have time to get used to higher monthly payments. The bigger impact will be on buyers and people refinancing fixed rate mortgages.
The QPAREB’s 2022 forecast notes that by the end of the year, increases in the five-year fixed mortgage rate could lead to monthly mortgage payments that are $250 higher than a similarly sized loan taken out in 2021.
“This is, of course, dependent on how the pandemic goes, and whether there’s a major economic shock that comes up,” Simard said.
Higher interest rates would reduce how much people can borrow, which in turn would reduce how much they can offer on a home. The new borrowing caps should help prevent a real estate bubble in Montreal, stabilizing prices, Simard said. While market conditions will continue to strongly favour sellers, it won’t be as easy for buyers to come up with the money to outbid each other.
In 2020, buyers on a budget flocked to suburban and resort markets, driving up sales and prices to unprecedented levels. But moving to the sticks doesn’t offer quite the same value that it used to. While prices are still lower on the other side of Montreal’s bridges, there has been a catch-up, Simard said. For those who cannot work from home indefinitely, increasing transport costs due to higher gas prices will become an important factor to consider — not to mention traffic jams.
“As soon as the pressure from the pandemic goes down, a lot of households will find that it is less ideal to be that far from the office,” Simard said.
The median price of condos in Montreal has not increased at the same rate as that of single-family homes, so they will become an important rung on the property ladder for first-time buyers — and an alternative to leaving the island for many households, he noted.
For comparison, here is the annual growth in the median condo price over the past five years:
In 2022, the QPAREB predicts the median condo price in Montreal will grow three per cent, to $370,800, as more buyers warm to condos.
In 2020 and 2021, Montrealers woke up to the appeal of sleepy small towns. In 2022, some will come to the conclusion that the dream isn’t all it’s cracked up to be.
As in suburban areas, some smaller towns and resort areas don’t have the infrastructure and amenities urbanites expect. Some buyers may also find they dislike being so far from the city, especially if their work requires a regular commute into town.
“We’re not expecting demand to completely die down in those places, of course, but compared to this year (2021), there’s a good chance that there’s going to be a cool-down of interest,” Simard said.
That could be good news for locals. Incomes are generally higher in the city and working from home has enabled urban professionals to take those big-city wages and outbid local buyers in more remote regions. Simard said that has created problematic affordability issues in some towns.
The story of the pandemic may have a few more plot twists in store, Simard noted, any or all of which could affect the real estate market in unpredictable ways.
“ The Omicron variant really put a wrench into a lot of forecasts,” he said.
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TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
The Canadian Press. All rights reserved.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
The Canadian Press. All rights reserved.
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