A dream that becomes unaffordable: the average price of a house increases by 20%

On the eve of the 4the With interest rates rising this year, it’s becoming increasingly difficult for young people to buy a property in Quebec, where the median price of a home has just risen 20%.

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The latest story comes from the Professional Association of Real Estate Brokers of Quebec (APCIQ). From April through June, the median price of a single-family home in Quebec rose to $450,000, a 20% increase.

For comparison, the median price of a single-family home in Quebec at the end of 2019 was $265,000, a difference of $185,000.

To date, the median price of a condo in Quebec is $381,000, up 14% in three months. For the greater Montreal area, it’s $410,000, up 14% there too.

“It’s scary, but the party’s over. With the renewed price increase this morning, this is the deathblow for the price development. The market will slow down over the next few months,” said Charles Brant, director of real estate market analysis at APCIQ.

Although prices continue to rise at an alarming rate, the number of homes for sale in Quebec is falling (-9%). The same applies to the number of sales (-14%).

“It’s a lot less [gens] who are ready to buy today, and with increasing rates there will be even fewer because they do not qualify,” he analyses.

No turning back

How long will the market continue its dizzying ascent?

“There’s a partial correction coming,” Desjardin’s chief economist Jimmy Jean said.

In Ontario, house prices have fallen for four straight months, he points out. Which is far from the case in Quebec.

Desjardins instead predicts that property prices here will start falling in 2023, but not as much as they have risen during the pandemic.

The decline predicted by the Lévis Institution is 12% by the end of 2023.

“Sales are already declining and lower prices will follow. But we will not see house prices return to pre-pandemic levels,” the economist assures.

Hear Francis Gosselin on Alexandre Dubé’s mic on QUB radio :

Something to think about

This means that by the end of 2023 the real estate market will have gained 35% in value compared to before the pandemic. And this regardless of whether we experience a recession or not and whether interest rates remain high or not.

“The issue of housing affordability will remain a major concern in Quebec as the province has seen a catch-up process that is not going away,” summarizes APCIQ’s Charles Brant.

And we’re just talking price here. We also need to talk about interest rates, another obstacle to affordable housing.

The Bank of Canada will hike interest rates from the current 1.5% today for the fourth time this year. The expected increase is 0.75%, which will take it to 2.25%. In January it was 0.25%.

For every 0.25% increase, we’re talking about an increase of $25 per month for every $100,000 mortgage loan, a mortgage broker recently told us.

If we take the example of a $300,000 loan whose payments were $1,000 per month in January, today’s increase will increase them to $1,600.

Something that gives many buyers food for thought, especially those making their first purchase.

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