The Organization for Economic Co-operation and Development (OECD) has warned Canada’s legislators about the need to introduce additional measures to cool down the housing markets in Toronto and Vancouver due to the high risks associated with mounting household debt and rising home prices.
Previous steps taken by the government include an increased minimum down payment for homes over $500,000 and tighter rules regarding new insurable mortgages, including the reduction of the maximal amortization period from 40 years to 25 years.
The Montreal market remains moderately calm and still available for first-time purchasers interested in single-family homes and newly built condominiums. This expanded accessibility is seen particularly in the condominium market, as high inventories are propelling merchants into making alluring arrangements to draw in new buyers.
Prospective Sales Up Slightly
The Montreal market for condominiums is experiencing a decrease in sales and construction projects for new condos. There are three key factors explaining this decline:
- The inventory of unsold new units remains high in relation to the pool of buyers.
- There is an ample supply of condos on the market.
- The moderate development in populations of potential buyers 35 and under limits the demand for condos.
Indeed, this frail populace development in the Montreal area limits increases on housing demand. Inside this prominent age demographic, first-time buyers make up a substantial portion of potential customers when it comes to the condominium market.
The economic overview for Montreal remains optimistic as significant investments are being made in different businesses, as well as ongoing infrastructure projects such as the Champlain Bridge, the Bonaventure Expressway, and the Turcot Interchange. These large-scale projects are pumping money into the local economy.
Sales Up and Down
In March 2016, residential sales in the Montreal census area saw an increase of 6 % compared to March 2015. In particular, sales were up 1% for Montreal Island.
Continuing with the upward trend, residential sales in April 2016 increased by 10 %, making it the most active month of April in the last six years.
In May, the larger Montreal area only saw a 2 % increase in residential sales while Montreal Island’s market for single-family homes took a hit for the first time in 16 months with a -1 % result. In the condo market, the increase went up to 8 % (805 sales) for May, while the sector, which took the hardest hit was the plexes with a huge decrease of 22 % compared to the same month in 2015.
“With the third consecutive monthly decrease in the number of condos for sale, the drop in supply is now confirmed,” states Daniel Dagenais, the President of the Greater Montreal Real Estate Board. “The supply of condos on the market represents 13.6 months of sales, a sign that market conditions are tightening,” he adds.
Single-family homes on Montreal Island saw their prices increase by 4 % in May, establishing themselves at $425,000 compared to $410,000 in May 2015. When it comes to condominiums, however, the increase is a little lower, which is expected when considering the high inventories in the Montreal market.
The median price for a condo is $289,950, up 2 % from $285,500 in 2015. Finally, the drop in the sale of plexes is rubbing off on the sale prices of multi-units – the median price was $487,000, up only 1 % when compared to $480,000 in May 2015.
Tighter rules regarding down payments and mortgage insurance seem to be influencing this particular segment of the Montreal market.
Onward into the Future
Looking forward, experts are staying optimistic about the Montreal market up to and into 2017, as employment conditions are favourable and mortgage rates remain relatively low.