Condo Montreal, Condo for sale Montreal – McGill real estate, real estate agency, real estate broker condo Montreal
by Patrice Groleau real estate broker condo specialist Montreal for the McGill real estate agency.
The Montreal Condo market is still going strong. To those who are waiting for an American-style collapse of the market, tell yourselves this; that a slight adjustment of the market is possible but we are far from American proportions/ratios. We have less indebtedness; less people who would need to sell quickly if faced with a sudden increase in rates and most of all, we almost have no foreign investors who have a tendency to bail when they smell trouble, all of which inflate crisis situations. There are less then 1% foreign investors in Montreal (ex. 40% in Vancouver!), which prove that all our ratios are more conservative than that of other big cities. Montreal is taking more of a slowly but surely pace which will allow for a slow landing and not a crash. Why shouldn’t Montreal be a little more expensive? It’s a lovely city where people want to live because of it’s natural rarity in that it is an island, and also for the basic supply and demand phenomenon, unlike American style speculative market bubbles.
It’s normal…the value of property is based on the relationship between supply and demand but that does not justify the past 10 years. As a result, a catch-up of the previous decades where the increases were less than they should have been was almost a must. However, people forget that the value of a house is based on the cost of building besides the value of the land that is directly linked to the supply and demand phenomenon in itself. Labour (electrician, carpenter, plumber, etc.) and material (concrete, wood, bricks, windows, etc.) represent 50% of the cost. It is therefore very difficult to expect a decline in property value if the cost of building itself is not decreasing. Montreal is not a real estate bubble. The fact that it is an island creates a natural rarity in terms of property. Montreal’s real estate value is Toronto in 5 years, Vancouver in 10 years, New York in 15, etc. Now that you are better informed; if you are waiting for prices to decrease you may be waiting for a long time.
You’re probably saying, of course he’s going to say that because he is trying to protect the industry in which he works as a real estate broker. Real estate brokers gain nothing by lying; they regularly represent their friends and family members in the resale of their properties. I always tell buyers to invest according to their means and needs. If they are lucky enough to have a good income, an almost paid off house, why not by a second property as a rental. All proportions considered, salaries might have not increased as much as real estate did in the past 10 years; but they had increased much quicker in the past decades, it’s a question of recalibration. Real estate value is not only linked to collective wealth. Stocks are not as lucrative as they once were. Nowadays, people are seeking concrete solutions not abstract ones. The increase in values is directly linked to property rarity coupled with the increase in building and labour costs (salaries of the construction workers). Have you recently looked into the cost of building? You will notice that the numbers are fairly close to market values. If that were not the case, then everyone would buy their own properties and build themselves to save money. Why don’t people do that? Because the profit margins are too low considering the cost of building. And if they do choose to build; then it’s purely because they want to build exactly according to their needs and not necessarily to save money because after all what they will save will not add up to the hours of work they will lose in salary during the months they will work on finishing their project.
It is often said that people saw the 2008 crash coming; did Quebec’s real estate market drop drastically during the world financial crisis? You may say yes in the case of the United States…however, the values in the United States had not only doubled in the past 10 years but they had practically multiplied by 5!!!!! Despite building costs similar to ours, the increases in the United States were not justified and were merely speculative. However, did you notice that the value of properties are on the up-rise and practically made up for the losses in major cities like New York, Boston, Chicago… Of course, if you engage in the same fear mongering speech for 50 years, you will be right sooner or later for a year but you will be wrong for the other 49 years!
Unfortunately, there is always the possibility that journalists may start this type of alarmist statement to implant the idea of catastrophe in the mind of consumers, which in return will start spending less thus leading us to a recession. Media is in charge of distinguishing the realities of each of the markets. Although the world economy is a reality, we still must consider realities in Canada, Quebec and Montreal. However, I still agree that people should buy according to their means and not beyond their capacities.
Since inflation is under control, the manager of the Bank of Canada will not increase the rates and not for a while because that would be considered voluntary recession. It has already been 5 years that the buyer to seller ratio is 35 to 1 for the famous Candiac Golf course and Laval sur le Lac houses/mansions, etc. Why? Because people much rather build their house themselves at the end of a street rather then buying “Mrs. Smith’s” who may not have the same taste. Yet, the prices haven’t decreased, people are not really sellers but are testing the market and will give up when it slows down. Properties are a dime a dozen in the suburbs. Those houses are not long-term investments because they do not meet real needs. Which retired couple needs a house with 5000 sq. ft., 8 rooms, 4 living rooms, 5 bathrooms, etc.?
However in Montreal, the proportions/formats meet the norms more. Good luck if you want to build your own house…there are no vacant lots for a bungalow. The options are therefore to buy an old house and renovate. Renovation costs are the same both in Montreal and its suburbs but its value is greater in Montreal; therefore the value to cost ratio makes more sense in the latter. That is why we renovate less in the suburbs.
Some journalists who specialize in finance (who would like to see people invest in stocks rather than in real estate) say that 20% of owners would not be able to withstand a raise in rates.
I have a financial background and have partaken in several university studies on money laundering, tax evasion, etc. Did you know that Montreal is a hub for these types of activities? The economy has its parallel with people working under the table in restaurants, construction, etc. But when we compare their real income to the one they have declared, they are not as financially strapped as the statistics may lead us to believe.
The Canadian banking sector is one of the most rigorous in terms of criteria for a mortgage approval. The rules are even more strict today, so let us consider ourselves lucky for having a house, an underground pool, 2 cars, a country house, going on trips and restaurants, etc. Today, our priority should be property. I admit we should cut down on other things but not by putting up for sale signs in Montreal…especially if the other option is renting which is right behind on an increasing curve!