The Montreal real estate market is heading towards a real estate bubble, according to the Professional Association of Real Estate Brokers of Quebec (APCIQ).
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The association presented its 2021 report on Tuesday and unveiled its outlook for the residential real estate market in the province of Quebec and the various regions in 2022.
“We are indeed seeing the formation of the beginning of a real estate bubble in the greater Montreal area, which is characterized, on the one hand, by the inability of the majority of first-time buyers to acquire property and, on the other hand, , by the vulnerability of new buyers and experienced buyers, ”the APCIQ said in a press release.
Characterized by a high rise in the value of real estate, the bubble results in a large and persistent gap between the price of certain real estate and the variation in their fundamental economic determinants such as wages or rental yield.
However, the expected rise in interest rates should partially absorb this increase in the single-family residential market.
“Market conditions that will remain very favorable to sellers will easily absorb the potential return of properties to the market, preserving the sellers’ advantage and preventing any fall in prices. We will rather observe a stabilization, even a correction, in several sectors, in particular those located in the higher price ranges ”, underlined Charles Brant, director of the Service of market analysis of the APCIQ.
The advantaged rental market
With the gap between monthly mortgage payments and rising rents, the rental market should continue to benefit from the situation, especially among young households in the Montreal region, according to APCIQ brokers. “However, pending a cooling of the market, many more young households could choose to rent in the short and medium term, thus betting on an acceptable opportunity cost, that is to say, without loss. financial, ”added Mr. Brant.
With the increase in immigrant quotas granted by the government, the Montreal market could, however, continue to remain under pressure despite inevitable and healthy price corrections in the short term, particularly in single-family homes and higher price ranges. With its financial stability, Quebec is becoming a destination of choice for immigration.