MONTREAL — The average price of a condo is expected to drop by up to five per cent in Greater Montreal next year, as the number of new and existing unsold units continues to rise, Canada Mortgage and Housing Corp. analysts said Thursday.
It’s the first time that the CMHC is forecasting a dip in average condo prices for the region since the agency began tracking the data in 2002.
On Montreal Island — where buyers have the upper hand in the condo market in all but a few neighbourhoods — prices are expected to dip next year in areas like Ville-Marie, Nuns Island and St-Laurent where active listings have been steadily rising, the CMHC said during its annual housing outlook conference for Montreal. Areas like Rosemont, where the condo market is now balanced between buyers and sellers, are expected to shift in favour of buyers next year.
“It’s a market that’s adjusting,” said David L’Heureux, senior market analyst at CMHC.
Since the housing boom peaked in 2011 — fuelled by low-interest rates — condo buyers have more choices and there is less demand in the weaker Quebec economy.
On Montreal Island, where 61 per cent of households still rent, about half of condo buyers live alone and are under age 35, the CMHC said.
The market for plexes and single family homes remained balanced during the third quarter of 2013. Total resales are expected to decline by six per cent this year, but then rebound by seven per cent in 2014.
New home construction is expected to decline this year in all housing segments, including a 25 per cent drop in Greater Montreal condo starts, as the market absorbs unsold inventory.
While 86 per cent of new condos delivered in downtown Montreal this year have been purchased by buyers, only 61 per cent of next year’s units have been pre-sold by developers.
“The message is that it’s going to take longer for this stock to be absorbed,” said Francis Cortellino, senior market analyst at CMHC.
Aside from buyers purchasing units for their own use, the presence of investors in Montreal’s condo market is growing, but remains marginal, Cortellino said. Citing the CMHC’s rental survey, along with provincial property evaluation rolls, Cortellino said investors purchasing condos to rent out to tenants make up between 10 and 15 of buyers in the Montreal market.
The CMHC data contradicts results from the 2011 National Household Survey, which said nearly 29 per cent of Greater Montreal condos are occupied by tenants.