While the once-soaring housing markets in Toronto and Vancouver are showing signs of cooling, Montreal is just getting started.
Demand in Canada’s second-largest city has heated up enough to put Montreal-area home prices on track to rise 6 per cent this year, the biggest jump since 2010, according to the Quebec Federation of Real Estate Boards. That’s up from a January forecast of just 1 per cent growth. Job creation, robust consumer confidence and new immigrants are fueling demand.
“We aren’t as crazy as Vancouver and Toronto as far as price increases,” said Eric Goodman, agency executive at Century 21 Vision in Montreal. “But activity is pretty good.”
Montreal’s real estate market so far has been left out of the global spotlight focused on the booming Canadian property markets of Toronto and Vancouver. That could change as foreign-buyer taxes in those cities curb demand and potentially send purchasers looking for a cheaper place to invest.
“I wouldn’t be surprised if Montreal becomes the new target for foreign capital investing in residential real estate,” Cynthia Holmes, a professor of real estate management at Ryerson University in Toronto, said in an interview Wednesday.”Montreal is the Goldilocks of the Canadian housing market,” she added, with Toronto and Vancouver too hot and Calgary too cold.
There are early signs of new interest in Montreal.
The city has attracted “a bit more” Asian investment since a 15 per cent foreign buyers tax was implemented in Vancouver in August, according to David L’Heureux, Canada Mortgage and Housing Corp. principal of market analysis for the Montreal region. “At the moment I don’t think it has a significant impact on demand,” he added.
Non-Canadian purchasers in Montreal made up about 1.3 per cent of the market last year, up from 0.7 per cent in 2013, according to CMHC, the Ottawa-based housing agency. “We expect the number to remain close to 1.5 per cent in the short term,” L’Heureux said in an interview Monday.
That compares to a Toronto Real Estate Board estimate of fewer than 5 per cent of foreign buyers last year in its region, where demand slowed after policymakers introduced a foreign buyers levy last month. Foreigners accounted for as much as 16.5 per cent of the value of property sold in the Vancouver region before British Columbia imposed a tax in August, according to the province. That figure fell as low as 1.8 per cent in September, though has crept back up.
While growth has slowed in both Toronto and Vancouver, the median price of a single-family home in Montreal is seen climbing to $312,500, faster than last year’s 2 per cent gain and the 1 per cent increase predicted earlier. Montreal remains a bargain, with average prices about one-third the levels in Toronto and Vancouver.
Montreal also is on track to break a seven-year record for number of homes sold, with 41,500 properties expected to change hands, up 4 per cent from last year, according to the Quebec board, which in January predicted a 5 per cent decline.
While the effect of the Toronto and Vancouver taxes remains to be seen in Montreal, a 6 per cent rise in home prices “is not problematic for now,” Quebec real estate board market analysis manager Paul Cardinal said in an interview Tuesday.
“It’s still cheap to buy a house in Montreal compared to other major markets in Canada, but activity has been higher than we thought it would be this year,” Cardinal said. It’s “too soon” to predict if the mainly French-speaking city may be on the verge of its own housing boom.
The average selling price of a detached home in Toronto rose 24 per cent last month from a year earlier to $1.2 million. That followed a 30 per cent increase in March. In Vancouver, the average benchmark price increased 8.1 per cent to $1.5 million in April.
Unlike Canada’s financial hub of Toronto, or Vancouver — popular with Chinese immigrants and others drawn to the Pacific Northwest — Montreal has a solid supply of housing to meet demand, including in the rental market, according to Cardinal.
“There has been a substantial increase in supply in Montreal,” Quebec Finance Minister Carlos Leitao said in an interview in New York last month. The province is closely watching for any spillover effect from Vancouver and Toronto and doesn’t rule out a measure that would better enable government to identify foreign buyers, he said.
Desjardins Group chief executive officer Guy Cormier, who oversees North America’s largest financial co-operative, told reporters in Montreal on Monday that he doesn’t currently see any need for a foreign buyers tax in Montreal or Quebec.
There’s “no real-estate bubble forming,” he said.
The Quebec real estate board’s previous low forecast for Montreal housing this year stemmed from concern that stricter federal mortgage rules introduced last year would crimp demand. That hasn’t happened, Cardinal said. He added that Quebec also isn’t seeing any fallout from the near collapse of Toronto-based Home Capital Group Inc. as it isn’t “a main lender” in the province.
The last time Montreal had a decline in home prices was 1996, according to Cardinal. The city hasn’t seen double-digit price gains for single-family homes since a 10 per cent jump in 2007, with the median price at $215,000. The last such increase for condos was in 2004, with a 20 per cent rise and the median price at $155,000, according the board’s data.
“The market today seems to have changed,” said Goodman at Century 21. “Houses aren’t staying on the market that long, the inventory of quality property is really low and anything priced right is getting multiple offers immediately.”