Montreal Real Estate Forecast – Catching fire?
In November the Montreal Gazette reported that “Montreal's luxury real-estate market is hot, hot, hot.” The Quebec Federation of Real Estate Boards reports that sales of homes worth more than $500,000 have increased 30% and sales of properties over $700,000 have jumped 40%. Montreal developers and realtors are attributing the jump in sales to the vibrant local economy and low interest rates, rather than speculation and foreign investment. This is probably accurate because the price appreciation in Montreal is half the rate of Vancouver and Toronto (see figure below).
While the Montreal market is certainly hotter than it has been in the past but it isn’t clear that Montreal will be in the same league as Toronto and Vancouver. Real Estate Analytics site, Better Dwelling, argues that developers and realtors in Montreal are trying to talk up the market but the fundamentals are very different.
A conservative forecast by CMHC in October predicted Montreal prices would continue to rise at a healthy rate of 4% annually. If Montreal homes catch the attention of speculators and foreign investors then the growth rate could quickly hit 8%.
An added benefit in Montreal is that prices are currently low enough for the average household to get into the market even after the January 2018 implementation of new federally imposed mortgage stress tests. These reduce the mortgage size a household can qualify for at banks. A household with an income of $90,000 could still get a $371,000 mortgage under the stress test and that is plenty of financing to buy a nice home.
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