Increased listings help rebalance demand and boost transactions
The Greater Montreal Area real estate market continued its growth trajectory in the second quarter of 2024, with sellers returning to the market and slightly rebalancing demand.
The aggregate price of a property in Greater Montreal rose 4.8% year-over-year to $599,400, up 3.5% from the previous quarter, according to the latest Royal LePage house price survey and market forecast.
This data comes shortly after the Bank of Canada's first interest rate cut in over four years, lowering the key rate from 5.0% to 4.75% on June 5th.
“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,” said Dominic St-Pierre, EVP of business development at Royal LePage. “Even if the 25-basis-point cut is immaterial in enlarging buyers’ budgets, it has certainly strengthened their resolve to resume the process.
“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.”
By property type, the median price of a single-family detached home increased by 5.8% in the second quarter of 2024 compared to the same period in 2023, reaching $681,300—a 3.1% quarterly rise.
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Condominiums saw a modest increase, with the median price rising by 0.9% year over year and 0.8% quarter over quarter, to $465,800. These prices include both resale and new builds, as provided by RPS Real Property Solutions, a real estate valuation company.
At the beginning of 2024, motivated buyers anticipated lower interest rates, but the number of sellers was limited, putting pressure on property prices. With more inventory available 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,” said Marc Lefrançois, chartered real estate broker at 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 highlighted that there are two types of buyers currently active in the market: those determined to make a purchase early in the year and those waiting for a larger supply of properties and further interest rate reductions.
“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,” he added.
The recent federal budget announcement of an increase in capital gains taxation on second homes and investment properties doesn't appear to have significantly impacted listings, according to Lefrançois.
However, he suggested it "may have a cooling effect on real estate investors and developers going forward."
Despite some rebalancing, Quebec's chronic housing supply shortage remains a challenge. St-Pierre highlighted the need for accelerated construction.
"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,” St-Pierre said. “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."
Royal LePage maintained its forecast for the Greater Montreal Area, projecting that the aggregate property price will appreciate by 8.5% in the fourth quarter of 2024 compared to the same period in 2023, reaching $614,978.
"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,” St-Pierre concluded.
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