The price of a property in the region rose 4.8% compared to the second quarter of 2023 reaching almost $600,000
Second-quarter highlights:
- On the heels of the first key lending rate cut in more than four years, Greater Montreal’s real estate market shows moderate price increases in most regions in the report
- The South Shore saw the strongest aggregate price appreciation in the Greater Montreal Area at 9.3% year over year, to $603,100
- The entry-level condominium segment was relatively active last quarter, as buyers prioritized affordability over square footage; the median price in the segment appreciated modestly, rising 0.9% in Greater Montreal compared to the same period in 2023, to $465,800
- Royal LePage maintains its forecast for the Greater Montreal Area, estimating that the aggregate home price in the fourth quarter of 2024 will reach $614,978, increasing 8.5% year over year
MONTREAL, Quebec, July 11, 2024 – According to the results of the Royal LePage® House Price Survey and Market Forecast released today, the Greater Montreal Area real estate market continued to grow in the second quarter of 2024. During this period, the aggregate[1] price of a property in Greater Montreal rose by 4.8% compared to the same quarter in 2023 to reach $599,400, representing a 3.5% increase on a quarterly basis.
The data comes just over a month after the Bank of Canada cut its key interest rate for the first time in over four years, from 5.0% to 4.75%.[2]
“It’s still too early to measure the full impact of this first rate cut on June 5th, but it is fair to say that the decision signals a change in tone by the central bank. Even if the 25-basis-point cut is immaterial in enlarging buyers’ budgets, it has certainly strengthened their resolve to resume the process,” says Dominic St-Pierre, Executive Vice President, Business Development, Royal LePage. “We may only see the effects of this easing of monetary policy on real estate transactions in a few months’ time, when subsequent reductions to the key interest rate are likely to have taken place. We expect activity to pick up, slowly but surely, between now and the end of the summer period.”
When broken out by property type, the median price of a single-family detached home rose by 5.8% in the second quarter of 2024 compared to the same period in 2023 to $681,300, posting a 3.1% increase on a quarterly basis. For condominiums, the median price saw a modest increase last quarter, rising 0.9% year over year, and 0.8% quarter over quarter, to $465,800. Price data, which includes both resale and new build, is provided by RPS Real Property Solutions, a leading Canadian real estate valuation company.
At the beginning of 2024, buyers were present, motivated by expectations of lower interest rates. However, the number of sellers was limited, creating increased pressure on property prices. With more inventory in the second quarter, sales accelerated.
“The year started off like a lion, with buyers rushing in even before the Bank of Canada changed course on its monetary policy,” notes Marc Lefrançois, chartered real estate broker, Royal LePage Tendance. “In the first quarter of the year, sellers returned to the market, but in smaller numbers than buyers, putting upward pressure on property prices. Then, in the second quarter, sellers made a stronger comeback, increasing the supply on the market and encouraging a rise in transactions.”
Lefrançois goes on to stress that there are two types of buyers currently active in the market. “Those who resumed their search in the first half of the year were determined to make a purchase, and did not wait for the anticipated more favourable mortgage rate environment. Other buyers who have yet to come forward are waiting for a larger supply of properties and further downward adjustments to the Bank of Canada’s key lending rate before taking the plunge.”
Limited impact of capital gains tax increase on second homes and investment properties
In its 2024 budget, the federal government announced an increase in capital gains taxation on the portion of capital gains exceeding $250,000, from 50% to 66.7%. This increase applies to capital gains realized on or after June 25, 2024, on assets such as income properties and second homes.
“We didn’t see any significant increase in listings of second homes or income properties this spring, since the federal government announced the increase in the capital gains tax,” says Lefrançois. “However, this measure may have a cooling effect on real estate investors and developers going forward.”
A market that will remain under pressure in the long term
Despite some rebalancing of supply and demand last quarter, the chronic housing supply shortage in Quebec remains a challenge. Rising borrowing costs over the past two years have not only put home ownership out of reach for some buyers, but also curbed builders’ borrowing capacity.
“2023 was marked by a record decline in housing starts in Quebec,” points out St-Pierre, citing the rising interest rate environment as the main cause. “As the Bank of Canada implements its plan to reduce its key lending rate, we should begin to see a recovery of new construction projects across the province. At the same time, the various regulatory and permitting bodies in Quebec municipalities must work together to accelerate the pace of construction in order to alleviate the housing crisis we are experiencing.”
The Canada Mortgage and Housing Corporation (CMHC) forecasts a more vigorous increase in housing starts in Quebec than elsewhere in Canada in 2024,[4] but new residential developments will remain too few to meet the growing demand stemming from immigration and the formation of new households.
Royal LePage maintains its forecast for the Greater Montreal Area
As announced in its Q1 2024 House Price Survey, Royal LePage forecasts that the aggregate price of a property will appreciate by 8.5% in the fourth quarter of 2024 compared to the same period in 2023, reaching $614,978.
“Demand has been more tepid than anticipated following the first rate cut by the Bank of Canada,” said St-Pierre. “We expect market activity to moderate in the summer and accelerate in the fall, especially if a second interest rate cut is confirmed. As buyers previously priced out of the market try to take advantage of better mortgage conditions, competition is likely to intensify, but we don’t expect prices to soar,” he concludes.
Provincial summary
The Quebec real estate market saw a sustained rise in property prices during the second quarter of 2024, but with significant disparities between the different regions in the report.
In the Greater Montreal Area, the increase in new listings slightly balanced demand. Nevertheless, the aggregate price of a property increased by 4.8% year over year, reaching almost $600,000 in the second quarter of the year. In Quebec City, high demand combined with insufficient supply led to aggregate price appreciation of 10.4% year over year, the largest increase among the major Canadian real estate markets examined by Royal LePage. Trois-Rivières, recently ranked as Quebec’s most affordable city in a Royal LePage report,[5] continued to see property prices appreciate in the second quarter, up 9.5% year over year, due to the scarcity and relative affordability of properties for sale. Gatineau also recorded a significant increase in prices, spurred by continued interest in high-end single-family properties and limited inventory. In Sherbrooke, a 3.1% year-over-year increase in the aggregate price was observed in the second quarter. Property prices remain among the most affordable in the country, at under $400,000.
Price forecasts for the coming months remain on an upward trajectory. In the Greater Montreal Area, Royal LePage forecasts continued price appreciation, with aggregate prices expected to reach $614,978 in the fourth quarter of 2024, representing an 8.5% increase over the fourth quarter of 2023. In Quebec City, prices should end the year 9.5% higher than in the fourth quarter of 2023.
The gradual lowering of interest rates by the Bank of Canada is likely to further stimulate demand, despite a persistent lack of inventory. Gatineau and Sherbrooke should also see a continuation of price increases, although the limited availability of new listings and low housing starts may curb growth. Overall, the Quebec real estate market should remain buoyant, with sustained demand, limited supply and steadily rising prices.
https://www.royallepage.ca/en/realestate/news_fr/the-return-of-sellers-to-the-greater-montreal-real-estate-market-rebalances-demand-slightly-in-the-second-quarter-of-the-year/
