Province of Quebec: Factors Stimulating the Residential Market for the Remainder of 2019

In its most recent Spotlight on Housing study, Desjardins Economic Studies looks at the two factors that could stimulate Quebec’s residential real estate market by the end of 2019.

Province of Quebec: Factors Stimulating the Residential Market for the Remainder of 2019 In its most recent Spotlight on Housing study, Desjardins Economic Studies looks at the two factors that could stimulate Quebec’s residential real estate market by the end of 2019. The financial incentive program for first-time buyers will be in effect in the fall, and the likely decline in some fixed mortgage rates will help support the housing market.

Several socio-economic factors are contributing to the downward pressure on North American mortgage rates. The Economic Studies group mainly highlights international uncertainties, including trade disputes, the risk of Brexit without a deal reached with the European Union and lower U.S. key rates, which are driving down bond yields. However, because the Canadian economy has regained strength and the current situation does not warrant a lowering of rates, the Bank of Canada is not expected to lower its key rate; thus, in turn, the variable mortgage rate should stabilize in the short term.

The report also highlights the fact that the average price in Quebec will increase by more than 4 per cent, for the third year in a row, and that the number of sales will increase by about 5 per cent this year. As a result of these conditions, access to home ownership has been reduced. Thus, the government responded with an incentive program for first-time buyers. However, Desjardins’ analysis clearly shows the regions in which few households will meet the eligibility criteria. But some Quebec markets, mainly those outside the Island of Montreal, will be able to benefit from this incentive because of relatively lower prices.

The financial incentive will be an interest-free loan equal to 5 per cent of the value of the mortgage for an existing property and 10 per cent for a new construction. It will be granted under certain conditions, namely that the family income does not exceed $120,000, that the maximum loan corresponds to four times the eligible income (+$480,000) and that the down payment by the contributor is the minimum of 5 per cent required by the CMHC. The buyer must reimburse the CMHC within 25 years or upon the resale of the property.

The new construction market in Quebec held steady in 2019. The largest contribution to its strength comes from the traditional rental market, as construction declined this year in the detached, semi-detached and row house segments, as well as the condominium segment. Government incentives should not change this trend as the cost of new construction leads young couples to purchase existing homes or rent. Finally, the new rules, applicable in 2021, on social housing, affordable housing and family housing may further reduce new construction in Montreal.

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