How will Covid-19 affect the real estate market – We are almost at the end of the first quarter of 2020, and the Montreal real estate prices have not been affected as yet, even amid the Covid-19 restrictions. Precautions are being taken in terms of showing properties and building inspections and demand for real estate is still present. People who are in the position to buy real estate are doing so. Albeit, the delays in most transactions are longer due to closures and safety measures put in place for the Covid-19 virus. A slowdown is inevitable in the next couple of months in terms of transactions however this may not affect the demand or the prices.
The Montreal real estate market is made up of the island of Montreal, Laval, North Shore and the South Shore. The market ended on a high note in 2019, with sales up 17% compared to the end of 2018. Prices of single family homes were up 8%, condo prices were up 7% and small plexes were up 10%. The most interesting factor that gave way to a hot Montreal sellers market was that active listings were down by 23%. This low supply of real estate coupled with the high demand of changing demographics, meant that many buyers were faced with limited choice and bidding wars.
In February, median prices for all properties were up when compared to 2018. Prices of single family homes and small plexes are up 13% and condo prices increase by 10%.
How will Covid-19 affect the real estate market?
1- Consumer Confidence
Consumer confidence goes hand in hand with jobs and economic growth. The more stable your income, the more confident you are in making large purchases, such as real estate. The index of consumer confidence is measured across Canada by using online surveys which aim to quantify consumer purchase habits in the near future. “ Those surveyed are asked to give their views about their households’ current and expected financial positions and the short-term employment outlook. They are also asked to assess whether now is a good or a bad time to make a major purchase such as a house, a car, or other big-ticket items.”
According to the Consumer Conference Board of Canada, the index shows that 21.5% of people expect their financial situations to improve in the near term. Although job growth is strong in Montreal and unemployment declined in February, many now face temporary job losses. As a whole, this will affect the number of buyers and sellers, and may shift us into a more balanced market in the next 3 months. Those who are still employed and have saved for a down payment, will be in the position to invest.
2- Oversupply or Undersupply
In the Montreal Metropolitan area, for the month of February, active listings of condominiums were down 17%, plex listings are down 10% and single family homes are up 1%. Overall there are about 7% less properties for sale when compared to February 2018. Due to the undersupply of properties for sale, Montreal is still considered a sellers market.
This can change if more people decide to put their home on the market. Or they can decide to hold onto their properties and create more of a shortage. The supply is always driven by economic factors and consumer confidence. I would suggest looking at your personal situation. If you are thinking of selling within the next 6 months to 1 year, I would highly recommend not waiting.
Variables affecting the real estate market can be both personal or public in nature. Your specific geographical area within Montreal may affect whether it is a good time to sell or buy. Your personal financial situation can be a variable, are you at retirement or just starting as a first time buyer? Government policies and political climate affect real estate decisions. As of now, Covid-19 is definitely the variable. The idea here is to monitor the situation and adapt to it quickly. This is the time to take stock of your current financial and personal situation, and look at whether selling or investing makes sense. Reach out to a trusted realtor who has a team of professionals to advise you.
4- Interest Rates
Interest rates affect the cost of monthly mortgage payments and your monthly budget. A period of high-interest rates will increase the cost of mortgage payments and will cause lower demand for buying a house. Currently in Canada, the interest rates are historically low which means this is a good opportunity to borrow money at a very low cost. If you qualify, I highly suggest borrowing as much as you can and even applying for a refinance loan. Again, this will depend on your personal situation. If you qualify, make a move, put in an offer to purchase and do not delay your real estate investments. Rates may go up, but prices will likely not come down in Montreal. Prices have been rising steadily in Quebec for years and are still low compared to the rest of Canada.
5- Demand and Demographics
According to the Canada Mortgage and Housing Corporation’s (CMHC) Housing Market Assessment report, the demand for Montreal real estate is still high and outpacing the supply of available housing both for resale and rental markets. The past 2 years, Montreal has experienced continued growth in positive net migration which fueled the demand for housing. Coupled with that, the aging population, international students and immigration heightened the need for housing. High demand boosted sales off the island of Montreal in the neighbourhoods of South Shore and Laval.
Eleni (Helen) Akrivos is a Chartered Real Estate broker in Quebec holding licenses in residential, commercial and mortgage practise. She teaches in the Residential real estate program at College Lasalle. Helen’s goal is to educate and inspire everyone to succeed in real estate. For questions or comments please reach her at 514 999 8888 or by email