Housing prices will continue to rise in the Montreal region until at least 2019, according to a forecast released by the Canadian Mortgage and Housing Corporation on Thursday.
“Rising demand, combined with declining supply, will cause market conditions to tighten again and become increasingly favourable to sellers,” the report said. “Consequently, the growth in the average price of homes over the forecast horizon should be definitely higher than the annual average of the last few years, which was about 2.5 per cent.”
The crown corporation said it expects the higher demand for property to be driven by increasing full-time employment rates among people aged 25 to 44, the result Montreal’s strengthening economy. However, increasing mortgage rates could limit this.
Just how much prices will rise will depend on the type of property, CMHC said.
“The single-family home and plex markets should remain very favourable to sellers from now until 2019, which will increase the upward pressure on prices for these types of homes, while the condominium market will be on the fence between a balanced market and a sellers’ market over that period,” the report says.
CMHC expects the average price of a resale home in the region to be between $365,500 and $375,000 this year. It expects that to rise to between $379,500 and $406,000 in 2018 and to between $394,500 and $437,800 in 2019.
With demand increasing, CMHC expects the number of housing starts to rise.
That will be led by condominium and purpose-built rental construction, it said.
On the rental side, it expects to see builders focusing on seniors residences as well as ordinary rental properties, though a portion of those will be aimed at baby boomers, the CMHC said.
“In the condominium segment, construction will increase thanks to a strong demand, which will be supported by employment growth, and also to significantly lower inventories of new and existing condominiums on the market.”
While the CMHC said it expects single family home starts to rise, that will be limited by space.
The growing number of rental housing starts will lead to 4,000 new apartments being “added to the rental housing stock annually until 2019, or about twice as many as in 2016,” CMHC said.
That will push the vacancy rate up to 4.4 per cent, it said.
While immigration may reduce the vacancy rate, the rising number of rental condos is expected to push it up.