Québec’s residential real estate market activity to decrease in 2017 due to new mortgage rules in Canada, says QFREB
As part of the sixth edition of its annual Fenêtre sur le marché conference, the Québec Federation of Real Estate Boards (QFREB) unveiled its outlook for the province’s 2017 residential real estate market.
According to its latest forecast, Québec’s residential real estate market will experience a slight decrease in activity in 2017. The number of provincial sales concluded through the real estate brokers’ Centris® system will decline to 72,500 transactions, a 7 per cent decrease compared to 2016.
“The new mortgage rules announced by the federal finance minister this fall, including the introduction of a mortgage rate stress test for mortgages with a low loan-to-value ratio (down payment of less than 20 per cent), will have a direct impact on the number of first-time buyers in Québec. Many potential buyers will be disqualified, resulting in a decrease in sales,” explained Paul Cardinal, Manager of the QFREB’s Market Analysis Department.
Fortunately, employment is one of the most important fundamental factors and has shown remarkable results over the past few months. There were 53,000 full-time jobs created last year in Québec, primarily in the 25-44 age group. This will support the demand for properties.
Furthermore, we expect prices to remain stable. The median price of a single-family home in Québec, which has posted moderate increases over the past four years, is expected to remain steady at $234,500 in 2017. “Once again, the new mortgage rules will make their impact felt. They will reduce the amounts that many buyers can borrow who will then inevitably have to choose less expensive homes,” added Mr. Cardinal.
Gradual Rise in Mortgage Rates
The QFREB also anticipates a gradual rise in mortgage rates. It estimates that by the end of 2017, the five-year discounted mortgage rate issued by Canada’s major financial institutions will rise by 0.25 to 0.50 percentage points. “Several measures will exert upward pressure on mortgage rates in 2017, in particular, the new OSFI rules that require federal financial institutions to maintain a larger share of capital for their insured mortgages. A reduction in the funds available for mortgages will exert upward pressure on interest rates,” explained Paul Cardinal.
Montréal Area: The Expected Decrease in Sales Will Not Affect Prices The QFREB predicts that, like the province, the Montréal Metropolitan Area will also see a decrease in residential sales in 2017. The Federation anticipates that 37,750 transactions will be concluded through the real estate brokers’ Centris® system this year, a 5 per cent decrease compared to 2016.
On the other hand, there will be a slight increase in prices for the Montréal area. The median price of a single-family home will reach $297,000 in 2017, an increase of 1 per cent compared to 2016. However, the QFREB estimates that the median price of condominiums will remain stable at $240,000.
“Since there has been a well-established downward trend in the number of properties for sale over the past few months in the Montréal area, market conditions will change little in 2017, despite a decrease in sales. The singlefamily and plex segments will remain relatively balanced, while that of condominiums, whose surplus inventory has been considerably absorbed in recent months, will only slightly benefit buyers,” explained Paul Cardinal.