Update on Condo Prices in Montreal
Condo Prices vs Condo Starts and Sales
In general, condo prices have not seen any real increases over the past few years. There tended to be too many condo project launches (IE condo starts) compared to the number of sales, and this also contributed to many condos being sold at a loss.
This trend slowly began to reverse at the beginning of last year (Q1 2016), particularly in Downtown Montreal, with demand surpassing new supply. This “indicates a tightening market and a reduction of inventory accumulation risks.” Studies by Altus Group for the downtown core showed sales volumes were above 500 units in the 3rd quarter, representing a marked increase in sales of 17% more than the historical average. This had not happened since Altus began these studies in 2011. (Source: Overview of New Condominium Market Downtown Montreal Q1, New Condominium Market Downtown Montreal Q3).
In fact, condo sales bounced back in 2016 achieving an increase of 5% across Greater Montreal.
So how does this affect condo prices?
Island of Montreal
JLR analyesd condo sales transactions published to the land registry for 2015 and 2016. The data shows a slight increase of 1.6% per median ft² for condo resales in 2016 as compared to 2015 (IE excluding new condos) for the whole of the island of Montreal. The median price is currently 315$ /ft².
It should be noted that between 2012 and 2014, the median price per ft² had remained fixed, and so in real terms had diminished. And, even though the median price per ft² increased this year, the increase was equal to the growth of inflation, implying there has not been any real growth when taking inflation into consideration.
As one would expect, the closer you get to Montreal’s City Centre, condo prices tend to increase. In fact, Ville-Marie is the most expensive borough with a median price per ft² of 404$. According to JLR, the median price for condos in Westmount is probably higher, but an insufficient number of transactions was recorded to calculate a meaningful value.
The borough of Rivière-des-Prairies/Pointe-aux-Tremble showed a median price per ft² of 183$. Among the boroughs with a sufficient number of sales transactions to calculate the median sales price, this is the only borough of Montreal with a median price/ ft² of less than 200$. Aside from the borough of Pierrefonds/Roxboro whose median price per ft² did not vary in 2016 as compared to 2011, the median price per ft² in all other boroughs of Montreal increased over the past 5 years.
However, 7 of 23 boroughs analysed by JLR registered a slight loss in the 2016 median price per ft² compared to 2015. These varied between 1% to 3%.
Please consult the complete JLR study: Analyse du Prix Médian au PI2 des Copropriétés Agglomération Montréal 2016 for more details relative to your own borough. PLEASE NOTE that net living area was used to calculate median price per ft², meaning that area for garages, private parking spaces, and balconies was excluded. These, however, can have a major impact on the value of a property.
Condo Sales Expected to Slow
It is expected that condo sales, and indeed all residential sales, will be affected by recent announcements concerning stricter criteria for obtaining a mortgage.
Consequently, condo sales are expected to slow down in the coming year and any price increases will tend to be small.
However, it should be noted that within Montreal’s Census Metropolitan Area (CMA), condo starts decreased during the first 11 months of 2016 as compared to 2015 according to data published by the Canadian Mortgage and Housing Corporation (CMHC).
In addition, the number of new units completed but not yet sold decreased by 15% in the 12 months between November 2015 to 2016. This reduction in new units available should contribute to minimizing the negative effects of tightening mortgage availability rules.
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