The other shortage, that of the supply of residential properties, is fueling hyperinflation in real estate prices, the rate of growth of which could at most slow down next year. This is only true, however, in the absence of a sharper-than-expected rise in mortgage rates. Access to property is set to deteriorate further.
Data from the Professional Association of Real Estate Brokers of Quebec (APCIQ) indicate that the downward trend in supply in the third quarter continued for a 23e consecutive quarter. Between July and September, there were 31% fewer properties for sale on the Centris system than during the same period in 2020. “This is the lowest level of active listings recorded since 2003, a period in which the size of the residential housing stock was however much smaller than today. “
Favorable conditions for sellers
The Association speaks of a record tightening of market conditions, extremely favorable to sellers. And shorter time to sell. 45 days, on average, for a single-family home, 51 days for a condominium and 68 days for a small income property, across Quebec.
This shortage even partly explains the slowdown in transactional activity on the resale market measured since the start of the year. “The return to a pre-pandemic level of activity for a third quarter is mainly due to the lack of properties on the market. With less than three months of inventory of properties, the Quebec resale market has never experienced such a shortage of supply since the Centris system of real estate brokers compiled the data, in 2000. This is exerting upward pressure. constant on prices, ”emphasizes Charles Brant, director of the APCIQ’s Market Analysis Department.
Sales thus continue their downward trend that began towards the end of 2020 in Quebec. And if the imbalance between supply and demand has generally eased, the situation remains to the advantage of sellers. “Most markets remain in a situation of overheating, and sales times are still very fast”, summarizes Hélène Bégin. At most, the principal economist at Desjardins Group observes that the surge in prices gives way to a certain stabilization, but that they “remain significantly higher than at the same date last year”. It expects an average price surge of 17.8% this year, after that of 16.9% measured in 2020.
According to the Teranet-Banque Nationale house price index for September, prices were still up 10% or more in 87% of the 32 urban agglomerations studied. Given the “extremely low” inventory of properties for sale, the institution’s analysts point out that they do not foresee a downward trend in prices in the coming months, unless mortgage rates rise more than expected.
Deterioration of accessibility
This hyperinflation of real estate prices also adds to the variables explaining the slowdown in the resale market. Oxford Economics points out that its housing affordability index deteriorated in almost all of the country’s major metropolitan areas in the second quarter, with a surge in prices outstripping income growth.
This index reached 1.35 at the Canadian level, which means that house prices were 35% above the borrowing capacity calculated on the basis of median household income. It rose ten points year on year, as soaring prices more than offset low mortgage rates and rising household incomes.
The Canadian real estate market remains, by far, less affordable than that of the United States. And the deterioration is expected to accelerate year by year.
next hit by the expected rise in mortgage rates, adds the analysis firm. An index above 1.45 in the second quarter of 2022 appears on its radar.
In April-June, the strongest deterioration was measured in Vancouver, followed by Montreal and Toronto. In Montreal, the index reached 1.04, and it should reach 1.10 in the second quarter of 2022. This reading recalls the recent assessment by the Canada Mortgage and Housing Corporation (CMHC) which indicates that the degree of vulnerability The Greater Montreal market is now high, as is that of the Ottawa and Greater Toronto markets.
For CMHC, “Fundamental factors such as employment income, interest rates and demographics do not justify the high level of current prices. This imbalance has led the Montreal market to a zone of moderate overvaluation since September, ”points out Hélène Bégin.
Small consolation, the Montreal market has not generally reached the speculative stage, the ” flips »Accounting for only about 3% of home and condominium sales in the agglomeration. In addition, the share of sales concluded in a context of overbidding has weakened since the spring.
The acceleration of inflation and its maintenance at high levels, however, cloud many crystal balls. With rising energy prices and persistent constraints on supply chains, which shake central banks in their comfort of a scenario based on a temporary inflationary effect, mortgage rates are increasingly under strong upward pressure.