On December 4, the CMHC Housing Market event presented by Les Affaires took place in Montreal. As a specialist in real estate developments, Performa attended to hear what industry stakeholders had to say.
These included: JLR, CMHC, Institut du Québec, Institut de la statistique du Québec, Groupe Maurice, Rachel Julien, Prével, the Quebec Professional Association of Real Estate Brokers, McGill University, UTILE, SOLIDES, Vivacité, Fonds d’investissement de Montréal and the University of Montreal.
This article summarizes our five key takeaways from the event. Our agency believe they could help inform the strategic planning behind your next condo or rental unit project.
1-Real estate trends in Quebec
Strategic planning should always start with collecting quantitative data. According to the CMHC, several factors need to be considered when projecting long-term trends. These include birth and death rates, immigration, non-permanent residents, inter-regional migration, the age of the population, etc.
Based on their data analysis, the following challenges lie ahead:
- Gradually adjusting to an ageing population, a trend which will persist even after the baby boomers are gone.
- Many new developments are targeting seniors, but young families are another important segment.
- Should we increase or decrease suburban and rural developments?
- How common will secondary homes be?
- How will cultural diversity affect the real estate market and residential design?
2-Why is condo supply falling?
Condo sales are strong across Quebec, and especially in Montreal. Unsurprisingly, it’s a seller’s market across the entire Greater Montreal Area. On the Island of Montreal, condo prices are soaring, adding 8% in 2019 according to the APCHQ through Centris. This has brought the average price up to $336,000.
So why are we seeing fewer properties up for sale? According to the CMHC, several factors are contributing to the situation:
Properties are selling faster, which means there’s little accumulation.
- Single-family home construction has fallen substantially in the past 15 years.
- Condo construction has declined in the past 4 to 5 years.
- People aren’t moving as often as they used to.
- Seniors are staying in their homes longer and household sizes are shrinking.
3-In a seller’s market, many people are choosing to rent
Even though housing is more affordable in Montreal than in other major cities, rising real estate prices are deterring a lot of consumers from buying their first home. Many are reluctant to commit to high mortgage payments due to concerns about job and income security. Since they don’t know what the future holds, they don’t feel confident enough to buy property. Plus, renting gives them more flexibility to move.
In the past, people had to choose between renting an old apartment or buying a single family home. But today they can rent new condos that offer everything they’re looking for. As a result, we are seeing a growing number of professionals, immigrants, foreign students and seniors who can afford to buy, but choose not to.
4-Rental buildings or condos: what do developers prefer?
Construction of rental apartments has taken off, with a 38% increase in 2019. Real estate developers are responding to low vacancy rates in new rental apartments. According the CMHC, 57% of new housing starts in Quebec are rental properties. With this new economic model emerging, developers are looking to balance the rental and condo units within their properties. From a developer’s perspective, rentals are easier.
What’s driving the hot rental market in Montreal?
- Higher numbers of immigrants and temporary residents like students
- The ageing population
- Young adults are more interested in renting than buying
- Rising costs: construction costs up roughly 30%, land costs up roughly 50% (due to scarcity), project development costs up roughly $6 to $8 million per project.
- A hot resale market with sellers getting more than their asking price.
- Lobbying cities and boroughs to update urban planning regulations to allow increased density, support high-quality developments and address the housing crisis. Meanwhile, Montreal should be bold and cater to the needs of the urban population. For example, we need higher density around metro stations.
- Demystifying densification so that the public understands why it’s better from both the environmental and economic standpoints.
- Reducing Montreal permit issuance times, which presently take up to 2 years (compared to 6 months in the past).
- Focusing on understanding customer needs in order to deliver a strong customer experience.
- Responding to the strong demand for affordable units with high-quality finishes and common areas accessible to owners and renters.
What will Greater Montreal’s real estate market look like in the future?
No one knows for sure, but there’s no doubt that there’s room for everyone. The more successful developers will be those who are sensitive to consumer needs and take a cautious and disciplined approach.
In order to get strong sales and quality leads, you need to analyze data, understand the market, plan your strategy, measure its performance and make adjustments along the way. You also need to develop a strong and distinctive brand identity for each of your projects. At Performa, we know that success happens when people work together. Project development, sales and marketing teams have to work in tandem and keep the lines of communication open in order to deliver a clear and consistent message across all platforms. Does your team have what it takes?