Canada Mortgage and Housing Corporation

Canada Mortgage and Housing Corporation

November 26, 2014 11:30 ET

CMHC Housing Outlook Conference

New Condominiums in the Montreal CMA: Demand Not Expected to Pick Up and Update on Investors

MONTRÉAL, QUÉBEC--(Marketwired - Nov. 26, 2014) - Canada Mortgage and Housing Corporation (CMHC) presented its annual Housing Outlook Conference today to about 800 industry professionals. Under the theme "Targeting the essentials," the speakers addressed the state of the real estate market across the province and in the Montréal census metropolitan area (CMA) and also provided an overview of what will shape tomorrow's market.

Provincial Outlook

"A gradual recovery in Quebec's economic growth over the next two years will stimulate housing demand, to a similar extent, in 2015 and 2016. During that period, resale market conditions will tighten slightly, which will contribute to supporting housing starts. However, even with demand edging up, a significant supply will keep the growth in prices at a modest pace," said Kevin Hughes, CMHC's Senior Economist for Quebec.

At the provincial level, total housing starts in Quebec will reach 38,200 units in 2014, 39,000 units in 2015 and then 40,100 units in 2016. Following a new rise in resales next year (to 72,600 units, from 70,900 this year), 73,400 Centris® sales will be registered in 2016, thanks to more robust job markets. Prices for existing homes will post gains of less than 2 per cent over the next two years.

According to Kevin Hughes, "very soon, the aging of the population will have significant impacts on housing supply and demand among households aged 75 or older, a population segment that is about to start growing faster."

Regional Outlook: Montréal CMA
Fundamentals for 2015 and 2016

In 2015, housing starts will decrease by 6 per cent from 2014 (to 15,700 units). The condominium market has entered an absorption phase that will continue in 2015 and 2016. "The number of completed and unabsorbed condominiums will keep rising and likely exceed the previous peak reached in 2006 (3,200 units). Out of the total of 2,600 currently unoccupied new condominiums, over 500 have remained unoccupied for more than one year since their completion," said David L'Heureux, Senior Market Analyst at CMHC. In 2016, activity on the new home market will be relatively stable (+1 per cent).

"Demand for new condominiums has not been inflated by speculators, given that very few new condominiums are quickly resold. As well, in downtown Montréal, the proportion of investors, local or foreign, is no higher in newer condominium projects than in other buildings," added Francis Cortellino, Senior Market Analyst at CMHC.

Centris® transactions will rise by 4 per cent in 2015 and by 2 per cent in 2016. Market conditions will remain favourable to buyers, and the growth in the average price will be relatively weak (about 1 per cent annually). "Over 35 per cent of condominiums now take longer than four months to sell, a proportion that has increased significantly with the easing of the market in recent years," said David L'Heureux.

New data shows that homes put up for sale by the owner made up a non-negligible portion of the supply on the resale market. "Residential properties for sale by the owner represented about 20 per cent of all homes put up for sale (with or without a broker) during the period from May to August 2014," added Francis Cortellino.

On the rental market, the apartment vacancy rate will remain stable in 2015 and 2016 (at around 2.5 per cent). Rental housing construction should pick up slightly. However, this market faces several challenges: in the short term, the management of rental properties, since the turnover rate in rental properties in the Montréal area is about 20 per cent, and, in the long term, changing client needs, as people aged 75 or older will account for 60 per cent of the growth in rental market clients within the next 15 years.

Montréal: Market Mapping

While the Montréal metropolitan area forms a whole, the individual sectors of the CMA show different trends. On the demographic front, many families leave the Island for the suburbs, supporting stronger population growth in these sectors. Still, a majority of new immigrants settle on the Island of Montréal, year after year. "In fact, immigration will continue to fuel demand for rental housing on the Island as well as the movement to homeownership, since immigrants tend to stay there when they become homeowners," said Geneviève Lapointe, Senior Market Analyst at CMHC.

In the condominium segment, one sector has stood out in 2014: the borough of Ville-Marie. On the resale market, conditions favour buyers in all sectors. However, Ville-Marie registered the greatest increase in the supply of existing condominiums and was among the sectors where market conditions were most favourable to buyers. On the new home market, the start of construction on several high-rise apartment buildings in this sector drove up total starts both on the Island and in the CMA. "Over the coming years, the completion of these large condominium projects will cause inventories to rise and prompt builders to slow down their pace of activity," added Geneviève Lapointe.

In the case of freehold homes,(1) the trend is slowing on the existing and new home markets, especially in the suburbs, which account for the bulk of the activity in this segment. On the resale market, conditions continued to ease over the past year and now favour buyers in more sectors. On the new home market, the implementation of the Metropolitan Land Use and Development Plan will limit the construction of single-detached houses over the coming years, including in the more outlying sectors of the suburbs.

As Canada's national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

Follow CMHC on Twitter @CMHC_ca.

(1) Freehold homes include single-detached, semi-detached and row houses.

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