The Marché de l’habitation conference is a yearly event put on by the Montréal-based business publication Les Affaires. The most recent edition took place on December 4, 2019. It brought together players from the Greater Montréal real estate industry, from builders to bankers. The event’s focus: the trends shaping Montréal’s housing market and their effect in the coming years.
CMHC economists for Montréal Francis Cortellino and Lukas Jasmin-Tucci have done a number of presentations at the Marché de l’habitation conference. Francis says:
“There are so many topics to cover when looking at the real estate market — from renting and buying to economic and demographic fundamentals. We cover all the different key indicators and then extrapolate the data to talk about the new trends in the industry. We present an overall look at the Montréal real estate market using a combination of all the analysis we produced for the year.”
This year, Francis and Lukas caught the attention of mortgage industry stakeholders by presenting Montréal housing market trends and what they mean for the future.
Ten key takeaways from the 2019 presentation
Here’s what you need to know about the Montréal housing market:
The Montréal housing market is relatively healthy, but overheating remains a concern
Our Housing Market Assessment looks at 4 main indicators. There’s currently no evidence of price growth acceleration, overvaluation or overbuilding on the Montréal market. However, there is sign of overheating, as housing demand is outstripping supply.”
Slightly slower growth for employment
Montréal employment grew by 4% in 2017 and 2% in 2018, creating around 115,000 jobs over the 2-year period. This was very good for housing demand.
For 2019 and 2020, we’re expecting somewhat weaker growth of around 1% per year.
Growth will therefore remain positive and support housing demand, though maybe not to the same extent seen in recent years.
The Island will keep losing young families to the suburbs
The Montréal-area population is aging. Strong growth in older households suggests that first-time homebuyers will have a lower impact on the market than second- or third-time homebuyers.
Still, an important demographic trend is the Island of Montréal’s loss each year of thousands of young couples and families to the suburbs. With current house prices on the Island, it’s hard to believe this trend will stop anytime soon.
Household debt remains high, but has improved
For Montréalers, the debt-to-disposable income ratio is 162%. This is high, and mortgage debt is certainly playing a role.
Still, this level of debt is an improvement if we look at financial data from the last 5 years. It’s also lower than household debt levels in Toronto and Vancouver.
Resale market: price growth will remain strong in the short term
Looking at the demand side of the resale market, transactions have gone up significantly. In 2014 and 2015, they numbered about 37,000 per year. In 2019, there were around 51,000 sales. Growth should slow, but remain high in 2020 and 2021.
On the supply side, though, stock hasn’t been increasing. In fact, the last time there were so few housing units for sale in the Montréal area was about 15 years ago. And we don’t see supply increasing in the short term.
Result: sellers’ market conditions and increasing upward pressure on prices. From 2013 to 2015, annual price growth was between 1% and 2%. Since 2017, it’s been around 5% to 6%.
New-home market: starts dominated by rental apartment buildings
2019 was the best of the last 15 years in terms of housing starts. Starts of single-family homes were down 5% compared to the previous year. Condominium starts were down 16%.
What made up the difference, then? Starts of rental units (conventional apartments and units in retirement homes), which were up 15%.
Long-term perspective: household formation could slow
Over the longer term, we see net private household formation slowing over the next 2 decades.
Because housing starts tend to align with household formation over the long term, we also expect, for now, that housing starts, too, will slow over the next 2 decades.
Rental market: demand will remain high in 2020
Population aging, net migration and younger households’ increasing propensity to rent will keep demand high for 2020.
Long-term perspective: rental demand should remain strong
Renter household projections suggest that rental demand will remain strong for the next 5 to 10 years. But a lot can change in just 5, never mind 10 or 20, years.
Perception of the impact of non-resident buyers on the Montréal market
According to a CMHC survey, public perception seems to be that foreign buyers are having serious influence on Montréal house prices. However, some data estimation (that could underestimate the real proportion of non-resident buyers) indicates that this proportion in Greater Montréal could be not as important as perceived.