- Greater Montreal Area’s aggregate home price rose 7.2% year-over-year in the first quarter of 2020, the region’s second consecutive year-over-year quarterly record in almost a decade
- Royal LePage forecast that if business activity resumes by late spring, home prices in the region should remain stable with a slight decrease of 0.5% by the end of the year, while the decline could be more pronounced, down 3.5% if business activity resumes in late summer
- Post pandemic, real estate demand in the area is likely to be significantly high, as a result of the surge of demand that abruptly stepped back from the market due to the lockdown
- Outside of the Greater Montreal Area, real estate markets with high employment in the government sector, such as Quebec City and Gatineau, are well positioned to recover relatively quickly after the pandemic
MONTREAL, April 14, 2020 – The Royal LePage House Price Survey and Market Survey Forecast released today showed that during the first quarter of 2020, the Greater Montreal Area real estate market saw price increases across all three housing types surveyed. During the quarter, the region’s aggregate home price rose 7.2% year-over-year to $441,979, the second consecutive year-over-year record increase in almost a decade. Due to the COVID-19 pandemic, however, Royal LePage has observed a decline in sales and fewer new listings that began mid-March. This trend is expected to continue as long as social distancing measures remain in effect.
“The Greater Montreal Area’s hot real estate market was disrupted by the COVID-19 pandemic at the start of the busy moving season where many individuals plan to sell or purchase a property,” said Dominic St-Pierre, vice-president and general manager, Royal LePage, Quebec region. “This is an unprecedented period across sectors of the economy, including real estate. However, these market conditions are artificial and punctual, and driven by a government mandate to respond to a global pandemic, as opposed to sustained low sales volumes generated by a long-term economic trend. Naturally, the duration of the crisis will dictate the scope of repercussions on real estate. If the economic activity recovers partially by the summer, and even if some sellers and buyers may remain temporarily on the sidelines after social distancing measures are waived, it is anticipated that future real estate demand in the Greater Montreal Area will be significant.
“As ordered by the government, Royal LePage agencies have stopped in-person property showings and meetings with clients, but many brokerage activities can still be done remotely,” added St-Pierre. St-Pierre highlighted that notaries have been added to the provincial list of essential services and that the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) has relaxed its rules for entering into remote brokerage contracts. These relief measures allow those who must buy or sell to pursue their transactions, while taking into account circumstantial delays related to inspections, visits and financing.
On April 13th, the Government of Quebec announced it will include residential construction sites, inspectors and land surveying to the list of essential services as of April 20th for projects to be delivered before July 31st, 2020.
“We are relieved to hear that residential construction sites, inspectors and land surveying will be added to the list of essential services as we could already see a number of issues on the horizon with transaction chains potentially broken, which could have dramatical consequences for many households,” said St-Pierre. “That is why we also look forward to see real estate brokerage added to the list of authorized activities in order to manage urgent transactions and avoid a potential housing crisis,” he added.
COVID-19: Home price forecast scenarios
The economic impact of the global pandemic is still unknown and the extent of its effect on the real estate market will largely depend on its duration. As of March 18th, 2020, the Conference Board of Canada reported that consumer confidence in Quebec fell 31.1 points, the largest monthly decline on record in the province, tied with the Atlantic provinces. However, with a growing population, low inventory and continued low interest rates, real estate is well-positioned to recover compared to other sectors.
“Historically, the financial and real estate crises of the past 50 years that have disrupted consumer confidence and the number of real estate transactions have had little effect on property prices when analyzed over a 12 to 18 month period,” said St-Pierre. “While sales will temporarily slow down during the current pandemic, we do not foresee a significant decline in home prices, at least not for a sustained period, since real estate remains a relatively safe investment as housing and shelter is an essential need. Additionally, we expect that the numerous buyers who have put their purchase on hold will create a surge from pent-up demand,” he added.
The Royal LePage forecast includes two possible scenarios. In the first scenario, Royal LePage predicts that if business activity begins to return to normal by late spring, prices in the Greater Montreal Area should remain stable, dipping a modest 0.5% year-over-year ($434,500) by the end of the year. However, if business activity does not pick up until late summer, Royal LePage expects that home prices could suffer from reduced consumer confidence due to sustained job loss, leading to a decrease in aggregate home price of 3.5% year-over-year ($421,400) by the end of 2020. This would be the most pronounced year-over-year decrease that the Greater Montreal Area has experienced in the last 50 years; this forecast factors in that Quebec is the only province in Canada where real estate brokerage is not yet included in the list of essential services.
Government authorities, cities and financial institutions have implemented measures to help alleviate the financial stress of businesses and individuals. The Bank of Canada significantly lowered the policy interest rate three times in a matter of weeks, from 1.75% to 0.25%. Many cities and municipalities in the province, including the City of Montreal, have also postponed property tax payment deadlines. These incentives could help potential buyers and are supportive of the real estate market’s recovery.
First quarter home prices
In the first quarter of 2020, the Greater Montreal Area saw a 7.2% year-over-year increase of the aggregate price of a home, reaching $441,979. The median price of a two-storey home and bungalow rose 8% and 6.9% year-over-year, respectively, to $557,594 and $344,043, while the median price of a condominium rose 5% year-over-year to $344,962.
Neighbourhoods with the largest aggregate home price increases in the first quarter of 2020:
- Montreal East (10.2%)
- South Shore (8.6%)
- Montreal Centre (7.3%)
Median price increases by property segment and by region in the first quarter of 2020:
- Median price of a two-storey home in the Greater Montreal Area (8%), Montreal East (11.9%), the South Shore (9.9%) and Montreal Centre (8.5%).
- Median price of a bungalow in the Greater Montreal Area (6.9%), Montreal West (9.3%) and Montreal East (8.6%).
- Median price of a condominium in the Greater Montreal Area (5%), Laval (7.3%) and Montreal East (6%).
First quarter sales data
Despite a decline in home sales in the last two weeks of March, residential activity remained stronger in the Greater Montreal Area in the first quarter, compared to the same quarter last year. Bungalow sales increased 7.5% year-over-year, while two-storey home sales climbed 14.3% during the same period. Condominium sales surged 12.8% year-over-year in the first quarter of 2020.
- Home prices in Quebec City remained stable in the first quarter of 2020. The aggregate price of a home increased 0.1% in the first quarter, compared to the same period in 2019, reaching $299,897. Despite the pandemic, home sales activity remained strong in the region this quarter, increasing 32.8% compared to the same quarter in 2019.
- The Quebec City real estate market is well-positioned to recover from economic damage sustained during the COVID-19 pandemic due to the significant size of its public sector as well as stable employment provided by the Université Laval and the local health care sector. Historically, Quebec City’s real estate market is relatively more stable than other cities in the province. Therefore, Royal LePage experts in the region expect that the pandemic’s impact on prices will be softer than other markets in the province.
- Sales activity remained very strong in Gatineau in the first quarter of 2020 increasing 24.1% year-over-year. The region’s aggregate home price rose 1.4% year-over-year in the first quarter of 2020, to $275,826.
- Impacts of the crisis on Gatineau’s home prices should be limited, despite the abrupt slowdown in sales and new listings. In the region, employment stability provided by the government sector should partly offset employment loss in the private sector, which is supportive of the real estate market. Royal LePage experts in the area envision that the Gatineau real estate market will be able to bounce back and resume pre-crisis level activity within the next 12 to 18 months.
- In the first quarter of 2020, the Sherbrooke residential real estate market experienced a year-over-year increase in the aggregate price of a home, rising 7.5%, the largest appreciation rate increase registered by the Royal LePage House Price Survey since the second quarter of 2018. Property prices in the region reached $267,931. The market saw a residential sales increase of 14.4% year-over-year.
- According to Royal LePage experts in Sherbrooke, the duration of the crisis will be the most important factor in assessing repercussions on the real estate market. Despite a drop in sales, local Royal LePage experts expect that, even if sales fell by 15 or 20%, the market could remain favourable to sellers and show relatively little price change, given the exceptionally high activity leading up to the lockdown and the limited number of properties for sale.
- The aggregate price of a home in Trois-Rivières decreased 0.7% in the first quarter of 2020, compared to the same period in 2019, with property prices reaching $198,132. Although prices remained relatively stable, sales increased 24.3% year-over-year in the region during the first quarter of 2020.
- The lockdown is expected to lead to a decline in the number of sales, at least temporarily, as local buyers and sellers will want to assess the economic repercussions before entering the market. In addition, the closure of construction sites will increase delivery times for new construction. Yet, housing prices are not expected to decline significantly in the region due to the lower inventory already observed before the pandemic. The Trois-Rivières real estate market could recover more slowly than other cities in the province after the COVID-19 pandemic depending on the extent of job losses. However, global demand for aluminum-based products, notably hospital equipment, could generate more jobs in aluminum plants, an important sector of economic activity for the region.
To access the Royal LePage Market Survey Forecast among Canada’s major real estate markets, visitrlp.ca/2020-forecast