MONTREAL — Montreal’s real estate market remained hot in August, breaking records for sales as it did in July.
The sales record matches those in cities across the country.
Some experts say, however, that the market is simply playing catchup from the spring when sales halted and real estate purchases ground to a halt.
In August 2020, 4,878 residential sales were concluded, which is a 39 per cent increase from 2019, according to a report from the Quebec Professional Association of Real Estate Brokers (QPAREB).
It was, the report says, the highest number of transactions ever recorded in August since the association began compiling market data in 2000.
“The loss of transactions due to the confinement period in early spring have almost all been recovered thanks to phenomenal sales activity in July and August, which are usually among the quietest months of the year,” said association president and CEO Julie Saucier. “The pandemic is clearly having an unexpected impact on buyer behaviour as there is a renewed interest in buying properties, particularly single-family homes.”
Vaudreuil-Soulanges (62), the North Shore (51) and Laval (48) led the pack in respective percentage increases with the Island of Montreal going up by 29 per cent.
Single-family home sales (2,601) had the largest increase in sales (47 per cent).
Francis Cortellino of the Canadian Mortgage and Housing Corporation said, however, that the numbers from 2020 as a whole show a three per cent decrease from 2019, which is not a true comparison as the COVID-19 pandemic threw the market completely off course.
From January to March, Crotellino said, sales were up 12 per cent; April and May, the markets halted; and then they sped into hyperdrive from June to August as people who had planned to buy in the spring followed through with their purchases.
“A share of those sales were probably people who wanted to buy in April and May, but couldn’t because the market was shut down,” said Cortellino. “There’s some catching up.”
Even with the record-breaking sales numbers since the market opened, from April to August, Cortellino said, sales are down 13 per cent.
One thing is clear, Montreal remains a sellers’ market as unit scarcity remains.
There was 12,953 active listings in the Montreal metropolitan area in 2020, which is 21 per cent less than the number in 2019.
“It was low and it’s still pretty low,” said Cortellino. “It was a sellers’ market and we’re still in a sellers’ market right now.”
Single-family home prices rose 24 per cent in August and the median price is now $427,500. Singe-family homes above $1 million more than doubled in August, which increased the median price.
The median price for condos is $312,000, up 12 per cent.
“Against all expectations, this enthusiasm is supported by a notable increase in the savings rate of many buyers in recent months,” said Saucier. “The situation is particularly present in the suburbs, where cases of overbidding are increasing and market conditions are still extremely favourable to sellers.”
The unemployment rate in Montreal doubled from February to September, and it remains to be seen how that will affect the real estate market, according to Cortellino.
“In the fall we’ll have to see how the market adjusts to this new reality, but for now there’s a lot of catching up,” he said.
Even if the markets cool, Cortellino added, it is unlikely that Montreal will swing from sellers’ to buyers’ market any time soon.
“The real estate market is so tight that it would be quite unlikely that there is a major shift where we go from a sellers’ market to a big buyers’ market where prices go down a lot or it’s really hard to sell a unit,” he said.
Cortellino said other markets in Canada were pretty close to a buyers’ market, so any slow down could easily tip the balance.
In Montreal, it would be a much longer road.
WILL RENT RATES GO DOWN?
High sale prices may have an effect on the island’s rental market.
Cortellino said census data since 2016 has shown that more younger people are renting, and this trend will likely continue as those under 35 have been most affected by COVID-19 job loss.
“With those price increases we’ve seen in Montreal right now, it’s probably more difficult for young people to accept home ownership,” said Cortellino. “A lot of the job losses are among young people as well, so that’s going to affect home ownership.”
According to a CMHC report, approximately, 10,000 new rental units will appear on the market in 2020, which is a record.
“This growth in supply will ease pressure on the rental market,” the report reads. “Demand for rental housing will be supported by a slowdown in homeownership, but overall, this demand will continue to be heavily dependent on net migration.”
Migration to Montreal has broken records in recent years, and fueled the low vacancy rate for rental property, Cortellino said.
The pandemic coupled with CAQ provincial government policy limiting immigration has cut that trend in 2020.
This will likely negatively affect rental demand, Cortellino said.
“If migration decreases a lot, it’s likely that the vacancy rate will increase on the market because it’s the main driver of the rental demand,” he said.
In addition, there has been a good deal of rental purpose construction in the past number of years meaning the supply is increasing.
“Once again we’re going after record after record with construction of rental apartments, so there are a lot of spikes coming onto the market, and at the same time the main driver of migration is decreasing,” said Cortellino. “Probably we’re going to have an increase in the vacancy rate.”