Real Estate Market Posts Vigorous Price Increases in Greater Montreal Area During the Third Quarter of 2016

Real Estate Market Posts Vigorous Price Increases in Greater Montreal Area During the Third Quarter of 2016

Drop in inventory and sustained demand propel largest home price appreciation in five years.

MONTREAL, Oct. 13, 2016 /CNW/ – The Royal LePage House Price Survey1 released today shows that real estate market activities in Greater Montreal Area continued to strengthen with the aggregate2 price of a home increasing 4.9 per cent to $352,798.

“Compared to the third quarter of 2015, the Greater Montreal real estate market experienced the highest increase in prices in five years, explained partially by the decrease in available properties on the market in conjunction with strong demand,” said Dominic St­-Pierre, senior director, Royal LePage for the Quebec region. “However, prices generally remained reasonable, in comparison with other large Canadian cities, which also resulted in an increase in sales volumes.”

According to the survey, the median price of a two-storey home in Greater Montreal increased considerably by 5.7 per cent in the third quarter compared to the same quarter in 2015, reaching $443,239, while the median price of a bungalow increased by 3.2 per cent to $287,198. Condominiums recorded strong year-over-year price increases, rising 5.2 per cent to $300,089. During the same period, bungalow and two-storey sales increased 2.8 per cent and 3.8 per cent, respectively, while condominiums saw the most significant increase in sales, climbing 11.9 per cent year-over-year.

In addition, the number of sales recorded this quarter in the luxury segment increased significantly by 13.6 per cent for single family homes of a million dollars or more and 35.8 per cent for condominiums over $500,000.

Increased interest from Chinese buyers in the area

“Anecdotally, we have noticed this quarter a slight increase in interest from Chinese buyers in Greater Montreal Area,” noted Mr. St. Pierre. “The direct air route between Montreal and Beijing established in September 2015 could also have contributed to an increased presence of Chinese buyers in the Montreal market. In addition, Air Canada will be launching in February of 2017 a new direct connexion between Montreal and Shanghai, which should bring more opportunities on the market .”

Limited impacts of the new mortgage framework for the area

Although the Montreal market is recovering, the new mortgage insurance rules announced by Finance Minister, Bill Morneau could slow the region’s real estate market expansion. Starting on October 17th, 2016, homeowners must have a gross debt service ratio of no greater than 39 per cent and a total debt service ratio of no more than 44 per cent in order to qualify for mortgage insurance. Insured mortgages must also undergo a rigorous stress test at the greater applicable interest rate between the contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate.

“While this new measure is significant, many banks have used similar criteria when writing mortgages for quite some time. What were once internal, self-managed bank policies are now laws that should help prevent household indebtedness in the long term,” concluded Mr. St. Pierre.
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