Montreal-area home prices saw a dramatic spike in June as first-time buyers flooded the Montreal housing market following relaxed restrictions on real estate.
Experts say first-time buyers drive up demand more than others, since they don’t leave a vacant home behind when they move. When a large amount of them enter the market at the same time, vacancy rates suffer.
The most dramatic rise was the median price of a two-story house in the Greater Montreal Area, which went up 8.7 per cent this quarter to $566,874, according to a recent study from Royal LePage. A bungalow will go for $351,889, up 7.2 per cent from last year. And while condos spiked in availability in June, the increase in demand pushed prices up 5.6 per cent year-over-year.
“Given the supply [before COVID-19], it would take 3 months to sell all the homes,” said Economist Francis Cortellino from the Canadian Mortgage and Housing Corporation. He says the high demand puts buyers at a disadvantage, with little means of negotiation. “We’re in a seller’s market,” he said.
In my 18-year career, I have never seen such a tight ratio between the number of active listings and sales,” said Dominic St-Pierre, vice president of Royal LePage for Quebec, in a Thursday release.
Experts agree the housing supply was stretched thin after COVID-19 paused residential construction in the province. “A lot of these projects are behind,” said Georges Gaucher, spokesperson for Royal LePage. “Deliveries will be late.”
In June, there were more than 40,000 homes under construction in the province, a distant third in Canada, with Ontario having more than double that amount of projects on the way. In Quebec, only 11 per cent of those projects will become fully or semi-detached homes, with the vast majority being apartment units.
While condos remain popular in Quebec, detached homes are favourable to buyers, according to Gaucher. “Think of the standard bungalow,” he said. “We’re way, way under the demand that we have.”
COVID-19 might have the opposite effect for those looking to rent. Cortellino says the shift to online university classes could drive down net migration, opening up rental units in a city where vacancy rates remain around 1.5 per cent, a 15-year low.
Experts project prices will taper off after the post-COVID rush dies down, but long-term increases are unavoidable. Overall prices are expected to rise 3.5 per cent by the end of 2020, compared to last year.