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Economic

Quebec housing market crawling out of stagnation

Ron Stang
Quebec housing market crawling out of stagnation
BEFUNKY - Montreal, Quebec City and Gatineau are all experiencing housing challenges but in their own way. Immigration, inflation and labour costs are still plaguing a somewhat recovering market for 2024.

Quebec鈥檚 three major housing markets, Montreal, Quebec City and Gatineau, see similar trends in somewhat different intensities.

These might be characterized as a housing shortage fuelled by immigration, inflation and labour costs, and a somewhat recovering market for 2024. But don鈥檛 expect prices to come down.

In Gatineau, a municipality that encompasses five regions across the river from Ottawa, rental vacancy rates at 1.1 per cent remain at an historically low level though 鈥渟table鈥 since 2018, CMHC said in its January rental market report.

An average two-bedroom purpose-built apartment went for $1,252 last year, an increase of 8.9 per cent.

Meanwhile in Montreal vacancies were slightly better at 1.5 per cent and the average price was $1,096, up 7.9 per cent. Quebec City fared worse with a 0.9 vacancy rate but cheaper units at $1040, up 4.8 per cent.

Residential construction started off slow last year, a hangover from 2022 but improved markedly in December, a Desjardins report says.

In fact, overall starts were at 2016 levels with only 38,912 built. And while rental starts outpaced other new construction, they also declined the most for all sectors with 9,000 fewer being built. But the province led the country in rental starts with well over 60 per cent of new starts compared to less than 40 per cent elsewhere.

And while home prices have generally stabilized since 2022 limited inventory resulted in the average provincial home price hitting a record $507,740 in January. However, the average price of a newly built home topped $870,000 in December.

All regions, even remote ones, are experiencing, if not a crisis, a crunch in availability.

鈥淲hat we鈥檙e seeing, even in Gasp茅sie (the Gasp茅 Peninsula) far far in the east, there is a housing shortage in a lot of places in the sense that availability is rapidly going down under two and three per cent,鈥 says Gabriel Gigu猫re, public policy analyst with the Montreal Economic Institute. 鈥淓ven Rimouski, if I鈥檓 not mistaken, it鈥檚 under one per cent. So, what we鈥檙e seeing now is that units of housing have got to be built across the province.鈥

Gigu猫re said the new home market has remained stagnant too long.

鈥淎nd it鈥檚 not going well in 2024. In the first two months we鈥檙e minus nine per cent in housing starts when compared to 2023.鈥

Desjardins predicts starts will 鈥済radually pick up鈥 this year based on interest rate cuts but won鈥檛 return to their 2021 peak.

Recruiting labour to build homes is also likely to be less challenging, the Commission de la construction du Qu茅bec found in a survey of members. That should lessen labour cost pressures and generate building activity.

Gigu猫re says housing starts could be accelerated if there was more imagination put into the market. Too many cities, planners and developers are still biased towards traditional housing. New developments can be hindered by arcane zoning laws and red tape.

鈥淵ou don鈥檛 have a lot of municipalities that will allow four units,鈥 he says. 鈥淢unicipalities need to be sensitized to this need for densification. There鈥檚 a lot of the classical view of single home, detached family. So, this is maybe something that will go forward, but right now you don鈥檛 have the political feeling that it鈥檚 changing.鈥

Gigu猫re proposed a mix of housing styles, not just single-family but townhouses, duplexes and triplexes. This could fill the 鈥渕issing middle鈥 between single-family and highrises.

鈥淎 townhouse is bigger than a condo, so people living in the suburbs might want to live in a townhouse,鈥 he said.

St茅phanie Lapierre, principal economist with the Quebec Professional Association of Real Estate Brokers, said there鈥檚 an innate contradiction in the housing market among the province鈥檚 regions.

Prices in Montreal are higher.

鈥淏ut we also see in some more affordable markets like the Quebec region the prices are lower, but the inventory is so low that it could be difficult to find the right property for your needs.鈥

Desjardins says several cities have introduced property tax credits to accelerate builds.

And the provincial government has tabled construction industry reforms to 鈥渕ake it easier for employers to assign workers where they鈥檙e needed.鈥

Avi Friedman, a McGill University architect professor with a specialty in home design, says there has been less government intervention in the market in recent years.

鈥淗ousing was left to the private sector with very little intervention by the government and we are bearing the consequences now.鈥

But one thing he鈥檚 noticed is that single-family homes are declining in popularity.

鈥淵ou see lots of six to 12 storeys. So, there is a transition here.鈥

And then there are the few out-of-the-box blockbuster developments that are changing the face of a city like Montreal.

One is developer Carbonleo鈥檚 $7 billion Royalmount 鈥渆co-community鈥 with more than 3,000 albeit 鈥渦pscale鈥 units, on the 43-hectare former Blue Bonnets horse racetrack.

Then there鈥檚 the recent proposal by the Vision Bridge-Bonaventure Consortium for 9,500 housing units 鈥 20 per cent affordable 鈥 for the city鈥檚 Peel Basin near downtown that would cover an area as large as eight football fields.

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