Here’s what we’ve noticed with regards to the market.
Right now the gap between the condo market and the house and plex market keeps growing.
Sales for homes and plexes are up compared to last year, while condo sales are down.
What does this say about the prices?
Homes and Plexes
With sales up about 1% for homes, and 3% for plexes, and prices increasing by roughly 7% and 6%, respectively: This segment is clearly doing well.
Nothing crazy, but, a solid start to the year, and likely in line with, if not slightly above, the 10-year average.
Condos
Condos, on the other hand, are starting to show a slow curve.
Sales are down about 7%, year-over-year, while inventory is up around 18% compared to this same time last year.
Prices haven’t dropped; but, they’ve completely flattened. They are sitting at 0% growth, year-over-year.
If this trend continues, we’ll have moved out of a seller’s market, and into a more balanced market.
We are currently standing at approximately 6.7 months of inventory. Once we hit something in the neighbourhood of 8 months’ inventory the condo market on the Island of Montreal will officially be considered “balanced”.
What can we take away from these facts?
If you’re buying a house or a plex:
Pretty much business as usual. Don’t pay too much attention to headlines saying the market is down, because once you’re out there shopping, you’ll quickly realize you still have to compete for the attractive properties. Bidding wars are still very much a fact of our real estate market.
Also: Not many homes and plexes are being built in Montreal; so, that lack of supply is a big reason why this segment continues to perform well, and will likely continue to do so over time.
Takeaways for the condos market
If you’re a seller:
This isn’t the time to test the market.
In a flatter market, with more inventory, pricing is key. You need to be hitting right at market value, or even slightly under, to get attention. Overpriced listings tend to be readily ignored when buyers have options.
That said: Even if you need to be sharper on pricing, it doesn’t mean condo values have dropped compared to last year… just yet.
Also…
Last week, we attended a National Bank event hosted by Darren King, one of National Bank’s chief economists.
According to Mr. King: The current geopolitical situation, involving Iran, could have two main consequences for Canada; particularly for Québec:
- Broad-based inflation
Although Canada is a net exporter of oil, rising production costs, and globalized market pricing, are likely to be reflected in the price of goods and services we consume. - Rising interest rates
While fixed rates are currently relatively low, Darren’s data interpretation anticipates the addition of a risk premium on Canadian bonds. This would put upward pressure on interest rates.
He does not expect a sharp increase in the very short term; but, rather, a gradual ratcheting up of rates over the coming years.
In conclusion
If you are approaching a mortgage renewal, and if you have the option, his recommendation is to choose a 3-year or 5-year fixed rate. This would tend to protect yourself against the anticipated rate increases.