Real Estate | The residential market is correcting faster than expected

Prices have started to fall in Quebec

Andre Dubuc
The Press

With interest rates surging, the housing market is quickly rebalancing, July resale market statistics released Thursday show. Prices started to fall in Montreal, two months later than in Toronto and Vancouver. And that’s just the beginning.

Growth in the number of properties for sale accelerated last month, and sales continued to slide. As a result, house prices in the Montreal area fell 5% from their peak recorded in April and May. And that’s just the beginning.

Desjardins Group, which anticipated a cumulative price drop of 12% in Quebec in June, now forecasts a decline of around 17%, says Hélène Bégin, senior economist. The price declines will stretch in time until the end of 2023.

“What is impressive is how quickly the housing market in Quebec has gone from overheating to returning to equilibrium,” she said, explaining the adjustments to her forecasts.

So far, the drop in price is barely 2% in Quebec compared to the peak, while it is 13% in Ontario and 9% in British Columbia. “The correction in Quebec started two months later than in these two provinces. We are just starting to see the beginning of the price drop in Quebec,” says Ms.^me Begin.

Strong increase in the number of properties for sale

Statistics for the residential real estate market in the census metropolitan area (CMA) of Montreal are compiled from the Centris database and published by the Association professionnelle des courtiers immobiliers du Québec (APCIQ).

There were 3,080 residential transactions in the Montreal CMA in July, a decline of 18% compared to 3,772 transactions in July 2021. All housing categories are affected (houses, condos, plexes) and all geographic sectors, including exception of the North Shore.

“We are still at levels close to what we experienced between 2017 and 2019,” said Charles Brant, economist at the APCIQ, in an interview. There is nothing catastrophic. We are still in good levels of transactions. But compared to what we have known [au début de 2022], we’re really not here anymore. Cases of one-upmanship are practically a thing of the past, he adds.

The increase in active listings continued for a sixth consecutive month in June in the metropolitan area. Registrations totaled 12,668, a 28% gain from July 2021.

With rising interest rates, buyers are finding it difficult to meet the criteria Mr. Brant suggests for explaining the drop in demand. With the stress test required by the Office of the Superintendent of Financial Institutions, borrowers should be able to take out a mortgage on the basis of a rate of 7-8% today.

“A normal correction”, he insists, after the episode of crazy one-upmanship at the start of the year.

The median home price in the Montreal CMA was $550,000 in July, up 10% from the July 2021 median price, but down 5%, from the high of $580,000 in July. April May.

Elsewhere in Quebec, the story is similar. The extent of the slowdown varies by region. “Less resales and more listings, all of these markets will follow this dynamic, it’s unstoppable,” says Mr. Brant.

In Canada

Toronto and Vancouver real estate markets continued to tumble in July, with sales and home prices falling for another month as it becomes harder to get mortgages and buyers wait to see up to where prices can go down.

In the Toronto area, home resales fell 47% in July from the same month last year and were down 7.3% from June on a seasonally adjusted basis, according to the Toronto Real Estate Board. In the Vancouver area, resales were down 43% year over year and were 23% lower than in June, according to the local real estate board.

Home prices also continued to fall in the country’s two most expensive markets, by 13% in Toronto and 12% in Vancouver.

With The Canadian Press