The current state of the real estate market
With the uncertainty of the labor market and immigration, our beloved forecasting crystal balls seem a little clouded.
Tensions on the labor and immigration markets
But let us tell you that a return to equilibrium in the residential market is not totally out of reach. Yes, you heard right, in Quebec, the real estate horizon could even tip slightly in favor of buyers somewhere around late 2023 and early 2024.
The slowdown in the housing market
Our loyal housing market moved further and further into its slowdown phase in the first quarter.
Decline in new mortgages
According to Equifax Canada, a 42% drop in new mortgages has been observed compared to the first quarter of 2022. This figure represents the lowest volume since 2014.
Impact on new owners
Much of this slowness is due to the declining percentage of first-time buyers on the market. In 2023, new homeowners are paying on average over $900 more in monthly mortgage payments than their 2020 counterparts, with an average loan exceeding $400,000. A figure, we grant you, to make your head spin.
The evolution of affordability
Improving affordability
Yet affordability is improving just a tad. Analysts at National Bank pointed out that, after reaching its most unaffordable level in over 30 years, mortgage payments as a percentage of income were down 5.4 percentage points in the first quarter from their peak. Nevertheless, it remains at a high level of 60.9% across Canada.
Falling residential property prices
This “improvement”, if it can be called such, reflects a fall in residential property prices for the third consecutive quarter, reaching a decline of 7.3%. This is the sharpest drop in a generation.
Comparison between Montreal, Quebec City, and Ottawa/Gatineau
By way of comparison, in Montreal, the annual salary required to acquire a property other than a condo at a representative price of $542,350 is $130,200. And for a condo at a representative price of $403,300, the annual salary required would be close to $97,220.
In recent years, housing in Montreal has become increasingly difficult for low-income earners.
Back to equilibrium
Renewed activity in the resale market
That said, a resumption of activity on the resale market was observed in the second quarter, fuelled by spring demand. The market remains in favor of sellers, but is tending towards equilibrium.
Housing market conditions across Canada
Across Canada, the housing market has been showing signs of a rebound for the past four months.
Real estate market trends in Quebec
In Quebec, the average price rose by only 2.5% over the same period, and remained stable in April.
Forecasts for the real estate market
Property demand set to weaken
As a result, demand for properties should weaken in the second half of the year, while supply will continue to rise.
Possible developments in the real estate market
According to this scenario, the average price could fall by around 5% from summer to early 2024. This corrects the economists’ previous forecast of a continuous price decline of 17% until the end of 2023.
