MONTREAL — Montreal condo owners are losing their advantage as sellers for the first time since 2001, after the resale market became balanced in September, the Greater Montreal Real Estate Board said Tuesday.
Yet even as September condo sales declined by 19 per cent, new condo construction in Greater Montreal remained on pace for a near-record year, Canada Mortgage and Housing Corp. said Tuesday.
In Greater Montreal, year-over-year resales in all housing categories dropped 17 per cent, driven largely by declining demand for properties worth $300,000 and less — a likely symptom of tougher federal rules on insured mortgages. So even as demand for condos valued at more than $300,000 remained stable in Greater Montreal, year-over-year sales of condos listed at $300,000 and under — properties particularly attractive to first-time buyers — dropped 24 per cent in September, the board said.
“This gives us the impression that it is a reaction to the new mortgage rules,” said Paul Cardinal, market analysis manager at the Quebec Federation of Real Estate Boards.
Indeed, Cardinal suggested September’s unexpected seven-per-cent rise in the median price of a Greater Montreal condo to $235,000 is simply because of fewer sales of less expensive units — and not a sudden leap in property values.
A similar trend is behind the rise in median prices in Laval, with condos up 15 per cent to $225,250 and single family homes up 14 per cent to $298,000. Year-over-year sales of Laval condos worth less than $300,000 dropped 42 per cent, while single family homes declined 24 per cent in September.
According to the board’s Home Price Index, property values in all categories rose modestly in September.
On the island, year-over-year condo sales tumbled 37 per cent in Hochelaga Maisonneuve and in the southwest — Lachine, Verdun and LaSalle — all neighbourhoods attractive to new buyers. At the same time, Montreal buyers have greater choice; board data showed active listings for condos rose 23 per cent year over year.
The softening market follows a series of changes introduced by Finance Minister Jim Flaherty this summer to cool once-scorching condo markets in Toronto, Vancouver and Montreal. Among them was a reduction in the amortization period on insured mortgages from 30 years to 25 years, a change which raises a buyer’s monthly payments.
Bank of Montreal economist Robert Kavcic predicted that a decline in resales should lead to lower levels of new residential construction.
On Montreal Island, condo starts tumbled 74 per cent last month, compared with a record-setting September in 2011, which was inflated by the start of several new projects in Griffintown, the CMHC said. On a seasonally adjusted, annualized basis, total housing starts in Greater Montreal rose modestly to 23,690 units in September, up from 21,800 in August, CMHC said.
“We’re still expecting a slight overall decline this year compared with last year,” said CMHC analyst Geneviève Lapointe.
Nationally, CMHC reported 220,200 starts annualized for September, a number still above the consensus forecast of about 205,000 and well north of what economists consider would be required to meet the growth rate in household formations.
“In our view, Canada still has overbuilding concerns,” said TD economist Francis Fong.
The Canadian Press contributed to this report