Housing market outlook—Montréal CMA

Francis Cortellino
Economist

CANADA MORTGAGE AND HOUSING CORPORATION

Montréal Census Metropolitan Area (CMA)

North Shore

Laval

Island of South Shore

Montréal

Vaudreuil-
Soulanges

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 Housing markets
Finance
Housing Market
You Assessment Rental
Demographics
are
here

Economy New

Fundamentals Resale

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CANADA MORTGAGE AND HOUSING CORPORATION
 Fundamentals:
Employment growth in the Montréal CMA
supports the housing market

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 Economic Fundamentals

Employment growth of 1.9% in 2018, +1.5% in 2019

Slight rise in mortgage rates continuing in 2019

Index of consumer confidence relatively high

Sources: Statistics Canada; Bank of Canada; Conference Board of Canada;

CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, forecasts.
 Demographic Fundamentals

More and more older households

(aging of baby boomers)

Weaker growth in the number

of young households

Strong rebound in migration since 2016

Sources: Statistics Canada; ISQ; CANADA MORTGAGE AND HOUSING CORPORATION

CMHC, forecasts.
 Net Migration Has Never Been Higher in Quebec

75,300
Annual Net Migration*
Province of Quebec 62,300

41,900

19,700

2011 2012 2013 2014 2015 2016 2017 2018

* October to September. CANADA MORTGAGE AND HOUSING CORPORATION

Source: Statistics Canada.
 Island of Montréal Continues to Lose Many Citizens,
Especially to Neighbouring Areas
Internal Net Migration – 2018
Laurentides: +3,900
Lanaudière: +1,800
Laval: +300

Suburbs Island of -23,700

Montréal

Source: ISQ.
Laurentides, Lanaudière, Montérégie: only the
parts within the Montréal CMA.
Montérégie: +5,600
CANADA MORTGAGE AND HOUSING CORPORATION
 Household Debt Lower in Montréal Than in the Rest of Canada

Household Debt-to-Income Ratios (%)

Montréal CMA and Canada
190

180

170

160
Canada Montréal
150
2014 2015 2016 2017 2018

CANADA MORTGAGE AND HOUSING CORPORATION

Sources: Equifax and Statistics Canada
 City of Montréal: 20-20-20
New regulations REM dues (tax)
First-Time Home Buyer Incentive (CMHC)
CANADA MORTGAGE AND HOUSING CORPORATION
 Housing Market Assessment:
The degree of vulnerability on the
Montréal housing market is low

CANADA MORTGAGE AND HOUSING CORPORATION

 Montréal Housing Market* Is in the Green

Overheating Price Acceleration Overvaluation Overbuilding

LOW
Degree of vulnerability MODERATE
* Montréal CMA, data up to the third quarter of 2018.CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC. HIGH
 Resale Market:
Now favourable to sellers,
for all housing types

CANADA MORTGAGE AND HOUSING CORPORATION

 Upward Momentum on the Resale Market
Annual Rate of Centris® Sales
Montréal CMA
53,700

47,150
37,000
2018: +5%
Q1 2019: +6%

Jan. 2014
2014 Jan. 2015
2015 2016 2017 2018 Mar. 2019
2019

Sources: Quebec Federation of Real Estate Boards (QFREB), through the Centris ® system;
CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, seasonally adjusted data.
 Sales Will Remain High
Centris® Sales
Montréal CMA
Forecast range
49,500
48,700
46,750
44,400
46,000 45,900
39,150

2014-2016 2017 2018 2019f 2020f

Sources: QFREB, through the Centris® system; CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, forecasts (f), annual average from 2014 to 2016.
 Supply of Properties for Sale Continues to Fall
Active Centris® Listings
Montréal CMA

35,800 2018: -17%

Q1 2019: -15%

24,500
20,500

Jan.
20112011 2012 2013 2014 2015 May2016
2015 2017 2018 Mar. 2019
2019

Sources: QFREB, through the Centris® system; CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, seasonally adjusted data.
 Market Conditions Tighten in All Segments
Active Centris® Listings per Sale
16 Montréal CMA

14
Buyers’ market
12

10
Balanced market
8
Plexes
6 Sellers’ market
Condos
4
Single-family homes
2011 2012 2013 2014 2015 2016 2017 2018 2019

Sources: QFREB, through the Centris® system; CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, seasonally adjusted data, three-month moving average.
 Price Growth on the Resale Market Will Remain Strong
Annual Growth (%) in Average Centris® Price
Montréal CMA
8,1
Steady growth in 2019 and 2020
5,8 5,6
5,4

3,9 3,6
2,2
1,8
0,9

2010 2011 2012 2013 2014 2015 2016 2017 2018

Sources: QFREB, through the Centris® system; CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, forecasts.
 Condominium Sales Up Significantly Everywhere
Centris® Sales, Condominiums – 2018

IslandofofMontréal
Island Montréal 9%

SouthShore
South Shore 27%

North Shore 14%

Laval 18%

Montréal CMA (+14%) Vaudreuil-Soulanges 28%

Saint-Jean-sur-Richelieu -22%
%
CANADA MORTGAGE AND HOUSING CORPORATION
Source: QFREB, through the Centris® system.
 Market Conditions Are Tightening and Are Especially Tight on the
Island of Montréal
Condominiums – 2018

Sud-Ouest (Griffintown)
Plateau/Rosemont/Villeray

Sellers’
Balanced

Buyers’

Sources: QFREB, through the Centris® system;

CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, calculations.
Resale Market: Forecast Summary

High number of transactions anticipated

Condominiums: market conditions tightening,

especially on the Island of Montréal, and
adjustment continuing on the North Shore

Single-family homes: market favourable to

sellers, even very favourable in some sectors
on the Island

Sustained growth in prices to be expected

CANADA MORTGAGE AND HOUSING CORPORATION

 New Home Market:
Starts will remain strong

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 Rate of Starts Remains High

Annual Rate* of Housing Starts

Montréal CMA

2018: +1% 29,000

Q1 2019: +14% 27,200

17,100

Jan. 2014
2014 2015 Mid-2015 2016 2017 End
20182017 2019Mar. 2019

* Average of the last six months.

CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 Starts Will Stay High in 2019-2020
Housing Starts
Montréal CMA
Forecast range
25,500
24,750 25,000 25,000

18,400 21,000
20,000

2014-2016 2017 2018 2019f 2020f

CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC, forecasts (f), annual average from 2014 to 2016.
 New Home Market: No Growth for Single-Family Homes,
Slight Downtick for Condominiums

Starts % Change
2018* 2018/2017

Freehold 4,652 +0%

Condominium 8,880 -6%
Rental

CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC.
 Condominium Starts Concentrated on the Island of Montréal

Villeray–Saint-Michel–
Parc-Extension,
Rosemont–La Petite-Patrie

Ville-Marie and
Sud-Ouest (Griffintown)

Intended market
Condominiums
Number of units
0 to 40
41 to 120
121 to 160
161 to 210
211 or more
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 Inventory of Unsold New Condominiums Has Fallen Significantly
Unsold New Condominiums
Montréal CMA
2,900

1,375
1,200

2011
Jan. 2011 2012 2013 2014 Feb.
20152015 2016 2017 2018 Mar. 2019
2019
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 New Home Market: Continued Momentum for Rental Properties

Starts % Change
2018* 2018/2017

Freehold 4,652 +0%

Condominium 8,880 -6%
Rental 11,468 +8%

CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC.
 Conventional Rental Housing Construction Stays Strong
Rental Housing Starts*
Montréal CMA 10,000
10,000

7,700

4,500 4,700

1,770

2011-2014 2015 2016 2017 2018

* Excluding co-operatives and seniors’ housing.
Annual average from 2011 to 2014.
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 Seniors’ Housing: A Slightly Calmer Year in 2018
Seniors’ Rental Housing Starts*
Montréal CMA

2,600 2,600
2,150
1,100 1,350

2011-2014 2015 2016 2017 2018

* Excluding co-operatives.
Annual average from 2011 to 2014.
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 Growth Observed Throughout the Area

Ville-Marie et
Sud-Ouest (Griffintown)

Intended market
Rental
Seniors' rental
Number of units
0 to 40
41 to 120
121 to 160
161 to 210
211 or more
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
New Home Market: Forecast Summary

Freehold: Scarce supply on the resale

market is stimulating construction,
especially in the suburbs

Condominium: Declining inventories should

begin to stimulate construction

Rental: Steady starts; low vacancy rate is

stimulating construction

CANADA MORTGAGE AND HOUSING CORPORATION

 Rental Market:
Vacancy rate falling

CANADA MORTGAGE AND HOUSING CORPORATION

 Despite the Strong Increase in New Units, There’s Been Marked
Tightening on the Rental Market Over the Last Two Years
Vacancy Rate (%)
Montréal CMA

4.0% 3.9%

2.8% 2.8%

1.9%

2013 2014 2015 2016 2017 2018

CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC.
Rental Housing Demand Up Significantly

Rebound in net migration

in young people’s propensity to rent

CANADA MORTGAGE AND HOUSING CORPORATION

 Vacancy Rates Also Low in Newly Built Rental Structures

Vacancy Rates (%) in 2018

Structures Built
All Structures
After 2005

Island of Montréal 2.6% 2.0%

North Shore* 0.4% 1.2%

South Shore 1.1% 1.8%

* Excluding Laval, data not available. CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 Strong Increase in Rental Condominiums

Rental Condominium Units

Montréal CMA
34,200

8,800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC.
 High Demand for Rental Condominiums

Montréal CMA Downtown–L’Île-des-Sœurs

18% of condominiums are 27% of condominiums are

rental units rental units

Vacancy rate stable, at 1.9% Vacancy rate down, at 1.0%

Average rent:* $1,200 Average rent:* $1,950

* For two-bedroom condominiums. CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC.
 Private Short-Term Accommodation Also on the Rise

Nights Booked Using the Largest Reservation Platform in Canada

2015 1.7 million

2017 10 million
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, special tabulations, 2019. Catalogue no. 13-605-X.
 Sharp Increase in Revenue for Short-Term
Rental Unit Hosts (owners)

Total Revenue* From Private Short-Term

Accommodation in Quebec

2015 $65 million

2018 $635 million

* Host revenues and fees collected by digital platforms. CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, special tabulations, 2019. Catalogue no. 13-605-X.
 Faster Growth in Number of Short-Term Rental Units
Than in Number of Hosts (owners)
Number of Hosts and Listings on the
250 000 Largest Reservation Platform in Canada

200 000

150 000

100 000

Average number of units offered

50 000
per host is on the rise
0
2015 2016 2017
Hôtes
Hosts Inscriptions
Listings
CANADA MORTGAGE AND HOUSING CORPORATION
Source: Statistics Canada, special tabulations, 2019. Catalogue no. 13-605-X.
 Seniors’ Housing Market in the Montréal CMA

Capture Rate

17.7%

Vacancy Rate

6.6%
CANADA MORTGAGE AND HOUSING CORPORATION
Source: CMHC.
 Seniors’ Housing Market in the Montréal CMA

From 2016 to 2018,

2,500 units were
added to the market
annually

CANADA MORTGAGE AND HOUSING CORPORATION

Source: CMHC.
Rental Market: Forecast Summary

Vacancy rate falling for past two years

Greater number of young households

renting than in the past

Strong increase in rental condominiums

CANADA MORTGAGE AND HOUSING CORPORATION

Focus on very large high-rise condominium buildings in Ville-Marie

CANADA MORTGAGE AND HOUSING CORPORATION

 Higher Proportion of Investors in Very Large High-Rises

All condominium buildings in Ville-Marie

30% investors
Very large high-rise* condominium buildings in Ville-Marie

57% investors
* High-rises total about 1,500 condominiums.
Sources: CMHC; Ministère des Affaires municipales et de l'Occupation du territoire; City of Montréal, property assessment roll;
CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, compilation and calculations.
 More Condominiums Resold Quickly in Very Large High-Rises

% of Condominiums Resold*
Within One Year

Allcondominium
All condominium buildings
buildings
(excluding
(excludingselected
selectedvery
verylarge
largehigh-rises)
high-rises)
1.8% 5% sold at a loss

Verylarge
Very largehigh-rise
high-rise condominium
condominium buildings
buildings 7.2% 15% sold at a loss

* Transactions between January 2016 and September 2018.

CANADA MORTGAGE AND HOUSING CORPORATION
Sources: JLR, compilation; CMHC, calculations.
 Rental Condominiums

Very large high-rise condominium buildings in Ville-Marie

375 condominiums rented monthly on the Centris® network

CANADA MORTGAGE AND HOUSING CORPORATION

 Cash Flow

Mortgage
payment

20% down
payment
Rent
Condo
fees

School
and
property
taxes
Sources: Centris®, special compilation; City of Montréal, property assessment roll; JLR;
CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, compilation and calculations.
 Cash Flow

75% Percentage of condominiums with a negative cash flow

$340 Median monthly loss for condominiums with a negative cash flow

Sources: Centris®, special compilation; City of Montréal, property assessment roll; JLR;
CANADA MORTGAGE AND HOUSING CORPORATION
CMHC, compilation and calculations.
 Large Numbers of Non-Resident Buyers in Montréal?

Country of origin:
Small number* of buyers
TOP 3 in 2018
identified as non-residents Mostly present on
downtown
Less than 2% of all transactions 1. China
condominium
in 2018
2. United States market
v
Small increase relative
to 2017 3. France

* Data is an estimate and likely somewhat underestimates the reality.

CANADA MORTGAGE AND HOUSING CORPORATION
Sources: JLR; CMHC, compilation and calculations.
CANADA MORTGAGE AND HOUSING CORPORATION
 Francis Cortellino
Economist
514-283-8391
fcortell@cmhc.ca
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