Real Estate Prices: What Can We Expect in Quebec?

This text is taken from our newsletter “Le Courier de l’économie” of June 6th. Subscribe by clicking here.

In view of the current economic situation, will real estate prices continue to rise in the coming years and for which types of housing and in which regions? asks Nicole Fontaine. Guillaume Brouillette, who is looking for a first home with his wife, is also concerned about the situation. Can we really expect stagnation or even a fall in real estate prices? If so, by when or […] how large? Also, is the situation similar across Quebec?

In the absence of a crystal ball, the only way to answer is by observing the forces taking shape and forecasts inspired by the economic situation. And yes, we’re starting to see sparse sale signs here and there that say “Changed Price.”

According to the latest forecasts, an average price decline of 24% can be expected across Canada, which will begin in the autumn and last until 2024, forecasts the analysis house Oxford Economics. For Quebec, new forecasts from the Desjardins Group point to an average decline of 12% by 2023 from a peak that would be reached this summer, with house prices of around 35% to 50% since the health crisis began.

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The risk of this scenario is a more severe correction caused by an even larger hike in interest rates from the Bank of Canada’s actions, which would push the Canadian economy into recession and fuel a movement of homes for sale. However, a real estate crisis or even a crash is not yet on the radar.

return to some normality

All the signs are that the housing market is on its way to some degree of normalcy, if only on the back of a historic deterioration in affordability levels, in the context of accelerating interest rate hikes and a generalized inflationary spurt.

First of all, it can be assumed that the drop in demand will put an end to the situation of multiple hasty offers – sometimes without verification or legal guarantees – and the phenomenon of one-upmanship. But a growing number of properties for sale, deteriorating affordability, fatigue among first-time buyers – who accounted for almost half of first-time home buyers during the pandemic — rising interest rates, rising inflation, the erosion of purchasing power and growing uncertainty about the economic situation speak for themselves a price correction. High levels of household debt and the rise in bankruptcies should also lead to more properties being offered on the market as the effects of monetary strengthening are felt.

This “normalization” is likely to affect all property types, but is more likely to affect single-family homes, slightly less condominiums (a more “affordable” segment for both the first-time buyer and the selling owner), and even less the investment property segment.

Moderate impact in large centers

In the greater Montreal area, the resumption of immigration, as well as the strength of the job market and a possible return of workers who migrated to the suburbs when they were full-time telecommuters, are variables that are likely to soften the magnitude of the resolution. In this area of ​​Montreal, but also in the greater Quebec City area, the noticeable presence of real estate speculators or buyers for investment purposes – real estate in Quebec is still more accessible than elsewhere in Canada – will also provide some support.

The negative impact could be felt more in the suburbs – more in those that are more constrained in terms of public transport – where housing overheating has been most manifest.

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