Buyers are returning to Quebec’s real estate markets even before the next reduction in the key rate by the Bank of Canada, notes the firm Royal LePage, which is revising upwards its forecasts for the year 2024.
The strength of the market during the first three months of the year surprised the brokerage firm’s team. “Buyers returned to the market earlier than expected,” notes Marc Lefrançois, real estate broker at Royal LePage, in an interview.
In the first quarter, the median price of a single-family home in the greater Montreal area jumped 5%, according to a report published Friday by Royal LePage.
Prices follow the same trend in other regions of Quebec. In three months, the median price of a single-family home increased by 3.5% in Quebec, by 5.1% in Gatineau, by 3.4% in Trois-Rivières and even by 7.4% in Sherbrooke.
“Initially, we said: ‘when interest rates fall, the market will resume its upward trend,’” explains Mr. Lefrançois. In light of the first quarter data, it is clear that we see that the market has already started this. »
With an insufficient supply of homes in Canada, potential buyers appear ready to return to the market before a possible drop in interest rates while the memory of soaring prices and bidding wars remains fresh in the memory.
The year 2023 was calmer, but Mr. Lefrançois observed a resurgence of activity in December. With interest rates rising, many homeowner households have decided to delay purchasing a larger home.
“This market segment has started to say: ‘OK, rates are going to fall, I can take variable. I’m going to start watching again.” »
Royal LePage is therefore revising its forecasts upwards for the year 2024. It expects that the price of properties at the end of the year will be 8.5% higher compared to last year in the large Montreal region. In December, it instead forecast an increase of 5%.
TD predicts a warmer spring
For his part, economist Rishi Sondhi of TD Bank sees a more temperate market than Royal LePage forecasts. He anticipates a “modest” price increase in the spring on the Canadian market.
“Many buyers and sellers will likely wait until they have more visibility on the timing of the next rate cuts from the Bank of Canada, which will put the market in a form of waiting,” he wrote in a note published on April 8.
Mr. Sondhi also believes that the milder winter across the country has caused buyers to move forward their searches to a little later in the spring.
The economist concedes that the market is tight in Quebec, but he believes that the deterioration of affordability limits the market’s ability to rise too quickly.
Few alternatives
Mr. Lefrançois believes that the forecasts of economists from major Canadian banks do not necessarily reflect what he observes on the ground. Despite high interest rates, the alternative of renting is not so attractive at a time when rents are also very high.
With insufficient construction, the broker expects prices to increase in the medium term and the market to tilt in favor of sellers.
However, he does not anticipate a return to the intensity observed during the pandemic when interest rates were at a low and tenants no longer wanted to be confined to a small apartment. Buyers would not have the same feeling of “urgency” to change scenery, according to him.
In a context of rising prices, first-time buyers who have a sufficient down payment should do their math if they decide to postpone their purchase until rates are lower, suggests Mr. Lefrançois.
He gives the example of a couple who would be ready to buy a house for $500,000 in greater Montreal. For this property, an 8% price increase in one year would represent an additional purchase price of $40,000.
“If you are not able to save this amount in one year, your purchasing power will decrease,” he warns. If you’re able to save a lot, the pressure might be less if you wait, but if you don’t have a big savings rate and are able to buy something now, I’d say go for it. »