Montreal, where sales continue to slump below last year’s levels, real estate agencies say.
“We are extremely worried that either the CMHC (Canada Mortgage and Housing Corp.) or the federal government could bring further measures in place to temper the real estate market,” said Dominic St-Pierre, director, Quebec region, for Royal Le-Page. “That’s what’s keeping me awake at night.”
Unlike the unexpectedly strong market rebound in Toronto and Vancouver last month, Greater Montreal resales declined two per cent, with condo sales dropping 13 per cent, both on an annual basis, data published Wednesday by the Greater Montreal Real Estate Board show. And while single-family home sales in Greater Montreal rose three per cent in July – the first increase in a year – improved activity over the summer months has been nowhere near as spectacular as in Canada’s other large housing markets.
“We don’t see any heating of the Montreal market,” said Paul Cardinal, manager, market analysis, at the Quebec Federation of Real Estate Boards.
“There was no rebound in Montreal,” National Bank economist Marc Pinsonneault said about the July sales figures.
Some analysts speculate that July’s unexpected 40 per cent rise in sales in Vancouver, along with a 16 per cent jump in Toronto sales, contributed to Ottawa’s latest housing crackdown. This week, CMHC confirmed media reports that it would cap banks and other lenders to a maximum of $350 million in new guarantees this month through the National Housing Act Mortgage-Backed Securities program – a decision that could raise borrowing costs.
The CMHC’s restrictions – estimated by one analyst to add 0.15 to 0.45 percentage
points to mortgage rates – come at a time when the affordability of owning a home at the national level “has become the least favourable since November 2008,” making the recent rebound in several housing markets “unsustainable,” a Wednesday note by National Bank said.
This deterioration in affordability – following a recent rise in mortgage rates – “does not bode well for future home sales,” and the CMHC’s announcement “does not help,” senior economist Matthieu Arseneau wrote.
While St-Pierre described the new CMHC restrictions as “a purely business decision” to “mitigate risk,” it could have a negative impact – albeit a small one – on housing sales. The changes would amount to about $1,900 on a five-year fixed rate, $200,000 mortgage, Rob McLister, editor of Canadian Mortgage Trends, told the Financial Post.
“The only thing that’s frustrating for us is that it’s not necessary here (in Montreal),” St-Pierre said of the CMHC decision.
He said July’s numbers, were an improvement from previous months where sales were dropping in the double digits.
“The numbers for July are what we forecast and they were reassuring for us.”
Royal LePage expects stronger sales in Greater Montreal for the second half of 2013, compared with the same period in 2012, St-Pierre said.
Year to date, Greater Montreal resales are down 13 per cent compared with the same seven months of 2012, while prices remain flat for condos and rose two per cent for single family homes.
Greater Montreal’s condo market has weakened as buyers continue to enjoy a vast array of choices. While new condo construction in Greater Montreal declined 24 per cent during the first half of 2013, active listings rose 24 per cent compared to the same month in 2012, Cardinal said. On Montreal Island, active listings for condos rose 18 per cent last month.
“I’m almost positive that there’s never been so many condos for sale on Montreal Island,” St-Pierre said.
Cardinal denied that there are too many condo projects underway in Greater Montreal, compared to demand. “There is some excess supply, but no overbuilding.” Nationally, Royal LePage operator Brookfield Real Estate Services said Monday the condo sector may continue to see “softness” in the short term, even as sales volumes for houses begin to trend upward in late 2013.
“The condominium sector may see some softness for the near term as the market absorbs new supply,” Brookfield chief executive officer Phil Soper said.
“In the longer-term, however, we believe that changes to demography, city planning and customer preferences all presage positive growth for this category.”
The Canadian Press contr ibuted to this report.
CONDOS: ACTIVE LISTINGS
For July 2013, compared to July 2012
Number of listings Change
Greater Montreal 11,615 24%
Montreal Island 6,758 18%
Laval 1,041 47%
North Shore 1,461 33%
South Shore 2,013 24%
Vaudreuil-Soulanges 342 40%
For July 2013 compared to July 2012
Greater Montreal -2%
*Results likely inflated by June flooding.