Montreal housing resale market stable, but condo starts drop significantly
Montreal’s housing resale market remains relatively stable, with weak to moderate increases in numbers of sales and prices forecast until 2017, according to a fourth quarter report from the Canada Housing and Mortgage Corp.
But the condo market is running out of steam, the Crown corporation reports, with housing starts to drop significantly in 2015 — 25 per cent in the condo market this year — before picking up slightly in 2016 and 2017.
On the other hand, rental housing starts have almost doubled so far this year, reaching the highest level in over a decade, according to the CMHC. A large portion of those rental units are seniors’ complexes as developers get ready to meet peak demand around 2030.
The Montreal market contrasts significantly with the Canadian outlook. There’s quite a discrepancy in price growth in the resale market across the country, said David L’Heureux, principal analyst for Montreal with the CMHC.
In Montreal, prices are expected to increase a feeble 2 per cent each year until 2017. Toronto and Vancouver are still booming, with 8 per cent and 9.2 per cent growth respectively this year, with drops to 4 per cent and 2.1 per cent for Toronto, and 3 per cent and 2.1 per cent for Vancouver in the next two years.
Economic and demographic growth is slower in Montreal, L’Heureux said. The growth in population age 35 and under is close to zero here, he said, and there is a significant decrease in net migration.
“The condo market is adjusting,” L’Heureux said of the relatively high supply of unsold new condos in Montreal. “Builders have definitely slowed down the pace.” This was expected, he said. Only rental housing starts are increasing, the CMHC reports.
Here are some other predictions from the report:
* On the resale market, the number of transactions on the Quebec listing site Centris will rise 5 per cent this year, the first increase in five years. For the next two years, transactions are expected to increase by 3.8 per cent and 1.8 per cent. At the same time, the number of listings is rising but not as quickly. leading to a more balanced market, L’Heureux said.
* The Montreal rental vacancy rate is rising, to hit 3.9 per cent this year and 4.3 per cent in 2017. The CMHC attributes this to decreased net migration to Montreal and the availability of rental condos. The trend is concentrated on the island of Montreal, meaning possible higher vacancy rates on the island.
* Mortgage rates are expected to rise moderately by late 2016. Current five-year rates are 4.10 per cent to 5.2 per cent, expected to rise to 4.7 to 6 per cent in 2016 and 5.1 to 6.5 per cent in 2017.
* Among risks the CMHC identifies this year and next: weaker economic growth than expected; a persistent increase in unsold new condos, leading to reduced condo starts again; builders turning to rental units, thus boosting vacancy rates in conventional housing; developers focusing more on seniors rental housing.
* Conclusion: it’s still a buyer’s market.