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Fueled by Condominiums, Montréal’s Residential Real Estate Market Continues to Grow in November

L'Île-des-Sœurs, December 7, 2017 - The Greater Montréal Real Estate Board (GMREB) has just released its most recent residential real estate market statistics for the Montréal Census Metropolitan Area (CMA), based on the real estate brokers’ Centris® provincial database. In total, 3,348 residential sales were concluded in November 2017, a 12 per cent increase compared to November of last year. This was the most active month of November in eight years.

Sales by geographic area

  • Four of the five main areas of the Montréal CMA registered an increase in sales: the South Shore (+19 per cent), the Island of Montréal (+13 per cent), Vaudreuil-Soulanges (+13 per cent) and the North Shore (+11 per cent).
  • Sales were unchanged in Laval.
Sales by property category
  • The vitality in the condominium segment continued into November as sales jumped by 23 per cent. In fact, the 1,137 condo transactions that were concluded represent a new November sales record. Sales were particularly strong in the suburbs, as condo sales rose by 33 per cent on the South Shore and by 53 per cent on the North Shore.
  • Sales of single-family homes increased by 8 per cent across the Montréal CMA, and this property category remained the most popular with 1,807 transactions in November.
  • Sales of plexes (2 to 5 dwellings) registered a 5 per cent increase, with 402 transactions.

"The oversupply of condominiums that we saw two years ago has been completely absorbed," said Mathieu Cousineau, President of the GMREB Board of Directors. "We’re even seeing a seller’s market for condominiums in certain neighbourhoods on the Island of Montréal, including Plateau Mont-Royal, Rosemont and the South-West," added Mr. Cousineau.


Prices
  • The median price of single-family homes across the Montréal CMA stood at $322,000 in November, up 5 per cent compared to November 2016, a similar increase to those registered in September and October.
  • Note that the median price of plexes jumped by 12 per cent compared to last year to reach $512,500.
  • As for condominiums, the median price stood at $254,510, which is a 3 per cent increase compared to last November.

Number of properties for sale

In November, the number of active listings (25,149) was down 13 per cent compared to November of last year.












Tougher mortgage rules could shut out 50,000 potential home buyers a year: report

During boom times, when there is plenty of business to go around, misconduct by real estate agents tends to be less serious, a RECO spokesman says.

MARK BLINCH/REUTERS

A report by Mortgage Professionals Canada, a national mortgage-broker industry association, forecasts about 18 per cent of home buyers – or about 100,000 people a year – would not qualify for their preferred home purchase option under new rules announced in October by Canada's banking regulator, the Office of the Superintendent of Financial Institutions.

Websites publishing Toronto home sales data quick to spring up after federal court ruling

 

Mortgage Professionals Canada chief economist Will Dunning, who wrote the report released Tuesday, estimates 50 per cent to 60 per cent of those not qualifying will be able to adjust their expectations and buy a cheaper home, but he anticipates the other 40 per cent to 50 per cent will likely not buy anything because the adjustments they have to make would price them out of the market.

It will leave about 40,000 to 50,000 potential buyers a year shut out of the market, which means a 6-per-cent to 7.5-per-cent drop next year in home sales, including sales of both new and resale homes, he said.

 

He added that rising interest rates are expected to have a similar level of impact on home buyers next year, on top of the stress-test rule impact.

"Between the two – the policy effect and the interest-rate effect – we're looking at somewhere between 12-per-cent and 15-per-cent less sales next year than we saw in 2016," Mr. Dunning said in an interview.

The stress-testing rules, which will take effect Jan. 1, will require borrowers who are making a down payment of more than 20 per cent of a home's value to prove they could still afford their mortgage payments if interest rates were significantly higher. The OSFI rule change will require borrowers to qualify for mortgages at the greater of the Bank of Canada's five-year benchmark rate or an interest rate two percentage points higher than they negotiated.

Mr. Dunning said federal regulators have introduced six prior policy changes since 2010 impacting mortgage eligibility in Canada, but until now, only the package of changes in 2012 – which reduced maximum amortizations to 25 years from 30 years – had a substantial impact on home sales.

"It appears that this new policy change is also likely to have substantive and prolonged consequences," the study concludes.

 

While home sales are expected to fall, the report forecasts 5.5-per-cent growth in the amount of outstanding mortgage credit in 2018, which is a reduction from 5.9-per-cent growth in 2017 and the prior 12-year average growth rate of 7.3 per cent.

Mr. Dunning said mortgage borrowing is expected to grow despite his forecast of falling sales, largely because there are so many new homes under construction that have already been started and have buyers scheduled to take possession next year.

"There have been a lot of housing starts lately and those are going to be completed next year, so that's going to require a lot of new mortgages on those newly completed dwellings," he said. "That's what's holding it up. If you look further out, there's going to be a further drop off in credit growth in 2019 and 2020."

Many analysts have predicted buyers will have to reduce their target prices by 20 per cent under the new stress-testing rules, but the report said those estimates ignore the fact that most people borrow much less than the amount their banks qualify them to borrow, so have leeway to adjust.

Based on data from a survey the mortgage association conducted in the spring – asking potential home buyers their target purchase prices, their down payments and their borrowing rates – Mr. Dunning predicts average home buyers would need to reduce their target prices by just 6.8 per cent or by $31,000 under the new rules.