Despite the ongoing slowdown in the real estate market, the feared lack of new construction and rising interest rates will continue to complicate the dream of first-time buyers to access the property, while a tightening of the rental market is expected to Montreal as elsewhere in Quebec, according to several experts.
The past year has started strong in the real estate sector, with prices rising rapidly in the first months of the year, when many first-time buyers took advantage of lower interest rates by the Bank of Canada in the pandemic context to achieve their dream of home ownership. “It really ‘boosted’ the real estate market,” said Charles Brant, director of the market analysis service at the Professional Association of Real Estate Brokers of Quebec (APCIQ).
This bubbling real estate market has contributed to a phenomenon of one-upmanship in sectors increasingly far from major urban centers, as the pandemic has facilitated teleworking. In a few months, prices have increased by 20% on average in Quebec, says Mr. Brant.
Galloping inflation, however, began to seriously affect citizens’ wallets, prompting the Bank of Canada to gradually increase its key interest rate, which in December reached 4.25%, its highest rate since 2008. The purchasing power of Quebecers then decreased, which lowered demand on the real estate market, and consequently resale prices. The average price increase over one year has thus stabilized at 13% in the province, according to calculations by the APCIQ.
“A balanced market”
As for 2023, the president of Proprio Direct, Philippe Lecoq, foresees “a transitional phase towards a balanced market” marked “by a slowdown in the overbidding rather than a slowdown in prices”. In other words, “buyers have a little more time to shop” now, as the pace of property sales continues to slow.
However, if potential buyers now have more time to shop for a property, many will not have the possibility of carrying out such a transaction next year, since prices will continue to be high on the market, just like interest rates. Thus, “the first buyers will find themselves again in 2023 in a situation where it is difficult to buy”, warns Charles Brant.
As for the rental market, demand “will be strong” next year, in particular due to a strong recovery in immigration which is already being felt. “It’s important for rental demand, because people, when they’ve just arrived, they’re more likely to be tenants than owners,” says analyst Francis Cortellino of the Canada Mortgage and Housing Corporation. . Thus, the rental housing vacancy rate could tighten in several large urban centers, such as Montreal, where it had conversely eased at the start of the pandemic.
The tightening of the rental market, combined with increases in values and property taxes in several cities in Quebec, could stimulate rent increases next year. In order to help low-income tenants, the Legault government promised during the election campaign to deliver 11,700 affordable housing units in four years.
However, over the past seven years, only 10,440 social or affordable housing units have been started under the programs of the Société d’habitation du Québec, according to data provided by the latter to the Homework. The new Minister of Housing, France-Élaine Duranceau, is now relying on the private sector to accelerate the pace of construction of affordable housing in Quebec.
Longer tenants
Francis Cortellino also notes that the curve has reversed in recent years with respect to the evolution of the proportion of Quebec households under 35 who are tenants. From 2001 to 2011, this percentage had fallen nationwide, from 65.9 to 58.3%, as more and more young households were able to afford home ownership. But that trend has since reversed, to the point where, in 2021, the percentage of households under 35 who are renters has reached the same level as in 2006.
“Now, with the rise in prices that we have had and the rise in rates, it adds a challenge to access to property”, especially for young families, notes Mr. Cortellino. A situation that increases the pressure on the rental market, both in large cities and on the outskirts of them, he notes.
Added to this are downward forecasts for the number of housing starts next year, in a context of rising construction costs and interest rates. Rental construction, in particular, should slow down considerably next year, “because several projects are no longer financially viable”, explains the director of the economic department of the Association des professionels de la construction et de l’habitation du Québec ( APCHQ), Paul Cardinal.
The carnage in RPA
The year 2022 was also the year of bleeding, which continues, in private residences for seniors (RPA), which have dropped like flies in recent months, often to be acquired by promoters who want convert these buildings into traditional rental complexes.
Since January 2021, more than 300 RPAs have closed in Quebec, according to the latest data available. And one or two residences go out of business every week, worries the chairman of the board of directors of the Quebec Regrouping of residences for seniors (RQRA), Hugo Boucher.
The latter points out that, in the vast majority of cases, the owners of RPAs threatened with bankruptcy are unable to find a buyer wishing to preserve the vocation of these buildings. “These are people who are at the end of their rope financially and, therefore, all that is left to them is their assets, which may have value for another use, in particular for standard residential,” said Mr. Boucher. .
Other RPAs continue to operate, but stop welcoming seniors with a loss of autonomy, “because providing care is very expensive,” raises Hugo Boucher. A situation that is cause for concern at a time when the health network is already under pressure and when the population is aging, he warns.
“There is a crisis coming in the area of housing for seniors who need care,” continues the president of the RQRA, who urges the Legault government to offer financial support to RPAs to keep those here afloat. “Everyone would be a winner. »