Despite the fact that residential real estate took a dip in most parts of Canada in 2018, Quebec was mostly immune to the decline, as both prices and sales volume grew throughout the year. Experts point to several factors that helped Quebec keep up a robust pace in 2018, including strong numbers for Montreal real estate.
The Overall Decline: Were Homes Cheaper or Did Cheaper Homes Sell?
Parts of Canada saw a decline in the average housing price, which on the surface would indicate that the average price of a home declined. This is not necessarily the case. For instance, housing prices per square foot can go up at the same time that buyers begin to focus on properties with fewer square feet. Thus, prices are still going up, but the average sales price is going down because homebuyers focus on cheaper housing options.
To better demonstrate this, consider that according to stats from the Canadian Real Estate Association (CREA), Toronto’s average housing price was up 2.1% compared to the year before, yet the Benchmark House Price Index (BHPI) of CREA was up 3%. The BHPI is considered a more accurate representation because it does not compare sales to sales as though they are all equal – it compares prices of similarly structured homes. In this case, the BHPI would seem to indicate that there were more low-priced homes sold in 2018 than in previous years.
That same index showed a growth of 6% in greater Montreal in December 2018 alone, while Greater Vancouver dropped by nearly 3%. In fact, Montreal home sales hit an all-time high in December 2018. How did they continue to grow as sales slumped throughout the country? Experts point to three reasons:
1. The Montreal Housing Market is Structurally Unique
Compared to other cities in Canada, the Montreal real estate market is structurally different. For example, the dominant housing type is represented by low-rise multiplexes. Montreal also has many more renters than owners, which is not the case in most of Canada. For these reasons, there is greater demand for townhouses and rowhouses in the area, which led to a 9% increase in the price of these types of homes.
2. Montreal Real Estate Prices are Lower and Have More Room for Appreciation
Compared to other large urban markets, Montreal housing prices are much lower and thus have more room for appreciation. Consider that in December 2018 the average nominal price in Montreal was $394,000, compared to $750,000 in the Greater Toronto Area.
3. Montreal Has Not Yet Imposed a Foreign Buyers Tax
Other areas in Canada, notably Toronto and Vancouver, have initiated a foreign buyers tax, which is one of the main factors that have led to significant decreases in luxury home sales. As of January 2019, Montreal is the last major city in Canada not to have such a tax – though the press has been predicting for months that Montreal will impose a foreign buyers tax sooner rather than later.
2019 Predictions for Canadian Real Estate
Now that the new year is upon us, what do the experts expect? A look at the numbers for the second half of 2018, especially compared to the first half of the year, can prompt cautious optimism as it seems that many areas throughout the country are slowly pulling out of the downturn.
Many new regulations were introduced in 2018, including the new mortgage stress test, and interest rates were increased. As the markets settle down from the immediate impact of these factors, it is reasonable to believe that 2019 could bring good news for most of Canada and great news for Montreal.