Montreal residential property prices soar again in March

Residential property prices in Greater Montreal continued to soar in March as sales activity bubbled over yet again despite a dearth of available homes.

Single-family home prices in the Montreal Census Metropolitan Area jumped 32 per cent last month, while the median price of condominiums climbed 21 per cent, the Quebec Professional Association of Real Estate Brokers said Wednesday in its latest monthly report.

Median prices for plexes — properties with two to five units — advanced eight per cent year-over-year.

Buoyed by persistently low interest rates and an economy that’s roared back from a pandemic-induced slump, property demand is also being fuelled by a jump in personal savings since the start of the health crisis. Many individuals ended up redeploying those unexpected savings to real estate.

In fact, home prices have risen so quickly that even the brokers association is sounding the alarm.

Accelerating home prices in Montreal “are an open door for speculation and over-valuation,” Charles Brant, QPAREB’s director of market analysis, said Wednesday in a telephone interview.

“More and more, we’re seeing prices that are disconnected from municipal valuations. There’s a loss of bearings.”

Some 6,348 residential property transactions — representing a combined $3.27 billion — closed in Greater Montreal in March, a record for that month. Active listings fell 16 per cent, paced by a 43-per-cent decline in single-family homes for sale.

Multiple offers are now commonplace. Thirty-seven per cent of Montreal-area single-family homes sold for above the asking price in 2020, compared with 16 per cent a year earlier. For condos, the proportion was 50 per cent.

“There’s a major supply deficit,” Brant said. Listings often represent between two and four months’ worth of sales, “which is very small by historical standards. The market is extremely unbalanced in favour of sellers.”

All regions aren’t benefiting equally from the hot market. Property sales in Laval actually contracted 14 per cent last month, while they fell five per cent on the North Shore, QPAREB said. Home sales rose four per cent on the South Shore and eight per cent in St-Jean-sur-Richelieu.

On the island of Montreal, sales jumped 32 per cent for the second consecutive month — mostly on the strength of a 45-per-cent jump in condo sales. Condo listings on the island soared 59 per cent.

After seven straight months of record highs, single-family home sales shrank for a second month in March, dropping seven per cent. Condo sales, which rose 27 per cent, and plexes, up 36 per cent, more than offset the decline.

A single-family home in greater Montreal now has a median price of $481,000. That compares with $347,065 for a condo and $660,000 for a plex.

“This price acceleration is slowing the market,” Brant said. “There are limits to what people can afford to pay, despite the good borrowing conditions.”

Those conditions are unlikely to last. As inflation picks up, many economists are now forecasting interest rates will start rising over the coming months. That, Brant predicts, could result in more properties being put on the market in Montreal in the next two years — along with a drop in prices.

“If interest rates rise, you could start seeing more households being unable to make their monthly mortgage payments,” he said. “We’re at a critical stage. It’s possible that we’re going to start seeing more supply on the market, which could push prices down in some of the more overvalued markets.”