Missed the Real Estate Wine & Cheese? Here are the key highlights!
Like everyone else, you’re seeing a booming real estate market on the island of Montreal and wish you could predict the future so that you would know what to expect. François Bissonnette decided to try his hand at this exercise and came up with two possible scenarios.
Before venturing into the future, however, let’s look at the present situation: between 2015 and 2019, the number of homeowners planning to sell their homes fell; the number of homes actually listed for sale fell even further – by more than half in 5 years. This can be partly explained by the ever-growing number of home sales.
Add to this rising home prices, which puts even more pressure on buyers looking to buy a property at a decent price. This in turn is causing the number of home sales to climb. In short, a seller’s market of the likes we have rarely seen on the island.
In the last two months, experts have been left speechless by the market’s confusing statistics:
In December 2019: Home sales rose by 23%, while inventory fell by 24%. That’s a record for December, which is normally a slow month.
In January 2020: Home sales rose by 18%, while inventory fell by 24%. On top of this is a 6% drop in new listings, whose impact will be felt in the coming months.
Despite a sluggish global economy, economic fundamentals will remain strong for Montreal real estate, as low and stable mortgage rates continue to bolster the market.
On the other hand, the drop in listings and new inventory could negatively impact sales, which will further push prices upward on the island of Montreal.
Little by little, these rising prices will shrink the pool of first-time buyers on the island, leading to urban sprawl.
As for what’s to come:
In this scenario, the number of home sales would remain stable at 19,000. So would the number of homeowners planning to sell: at 24,000 for the next three years. The island would become even more of a sellers’ market, with around 4 sellers for every buyer. Prices would increase by about 7% per year in central areas.
For Outremont this represents an increase of 21% over three years.
A condo that sold for $625,000 in 2019 would sell for $790,000 in 2022. A single-family home selling for $1,800,000 in 2019 would sell for $2,275,000 in 2022.
In this scenario, the number of home sales would drop by 4% per year, accompanied by a 4% annual increase in the number of homeowners planning to sell over the next three years. The island would continue to be a sellers’ market until the end of 2022 before returning to a more balanced state. Prices would increase by about 5% per year in central areas.
For Outremont, this represents a 15% increase over three years, or $100,000 for the average Outremont condo and $280,000 for the average Outremont home.
In summary, regardless of which scenario comes to pass, we should see prices increase between 15% and 21% in the next three years – unless there’s a global recession.
Which scenario do you think is most likely to happen?