According to the Québec Federation of Real Estate Boards (QFREB), yesterday’s announcement by the Ontario government of a 15 per cent tax on property purchases by foreigners in Ontario could increase the presence of foreign buyers in the Montréal real estate market. However, the QFREB does not expect any major short-term impacts.
The proportion of foreign buyers in Montréal is estimated at only 1.5 per cent by the Canada Mortgage and Housing Corporation (CMHC). Although this figure is possibly underestimated, the proportion is nevertheless quite low. In comparison, the government of British Columbia estimates that the proportion of foreign buyers in the Vancouver area is 9.7 per cent, while the Toronto Real Estate Board estimates this proportion to be 4.9 per cent in the Toronto area.
In Montréal, the presence of foreign buyers would be limited mainly to certain central neighbourhoods for single-family homes and to the downtown area for condominiums. “Activity by foreign buyers in the Montréal area could have an upward impact on property prices in some central neighbourhoods, as this is where they tend to concentrate their purchases,” explained Paul Cardinal, Manager of the QFREB’s Market Analysis Department. “However, the impact would be limited given that Montréal’s real estate market conditions are very different than those observed recently in Toronto and Vancouver,” he added.
Far from overheating
The residential real estate market in the Montréal Census Metropolitan Area (CMA) has experienced very moderate price increases in recent years. The median price of single-family homes rose from $279,000 to $295,000 between 2013 and 2016, a 6 per cent increase over three years. The median price of condominiums also increased by 6 per cent over the same period ($227,000 to $240,000 between 2013 and 2016).
In addition, conditions in the Montréal real estate market remain relatively balanced: the single-family segment is slightly in favour of sellers, the plex market is balanced, while the condominium segment still shows a slight oversupply. As for the rental market, the Montréal vacancy rate is 3.9 per cent (source: CMHC), which is much higher than Toronto (1.3 per cent) and Vancouver (0.7 per cent).
“We are far from a housing shortage, whether it be the resale, new construction or rental markets. In this context, it is difficult to envisage a surge in prices like Toronto,” added Mr. Cardinal.
A popular real estate market
However, more and more foreign buyers are turning to Montréal, which has resulted in a significant increase in net migration and in the number of non-permanent residents in 2016. Several factors explain this attraction, in particular, the marked improvement in the economic and employment situation. Over the past twelve months, 81,500 new jobs were created throughout the CMA and the unemployment rate declined to only 6.6 per cent in the first quarter of the year.
Also, Quacquarelli Symonds named Montréal the best student city in the world in 2017, surpassing Paris for the first time in five years. Finally, it is important to note that property prices are among the lowest in North America.
About the Ontario 15 per cent non-resident tax
The Ontario government announced on April 20 a series of measures designed to slow down the meteoric rise of property prices in Toronto and its surrounding areas. One of the main measures introduced is the imposition of a 15 per cent tax on non-resident home purchases, as was the case for the City of Vancouver which introduced a similar tax in August.
About the Québec Federation of Real Estate Boards
The Québec Federation of Real Estate Boards (QFREB) is a non-profit organization representing the province’s 12 real estate boards and their nearly 13,000 member real estate brokers. Its mission is to support Québec’s real estate boards in order to defend, protect and promote the interests of real estate brokers through the provision of services in the areas of professional practices, public affairs and market analysis. The QFREB is guided by a collaboration-oriented approach as well as resource sharing.