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2012 Outlook for the Residential Real Estate Market in Québec: Momentum Will Continue

2012 Outlook for the Residential Real Estate Market in Québec:  Momentum Will Continue

Despite a mixed economic outlook, the residential real estate market should experience another good year in 2012. This is due primarily to mortgage rates that will remain near their current level, which is their lowest level in 60 years. The number of MLS®  sales will increase slightly compared to 2011 and price growth, although slowing, will be slightly above inflation.
Interest Rates at a 60-Year Low
As for the world’s economy, 2011 was marked by the sovereign debt crisis in several countries in the euro zone  and  by  concerns  with  the  strength  of  the  United States’ economic  recovery.  Uncertainty  on  global financial  markets  led  to  an  influx  of  international  capital  in  Canada,  a  country  that  is  considered  well-positioned  on  several  fronts,  particularly  that  of  public  finances.  The  purchase  of  Canadian  government bonds,  deemed  less  risky  by  investors,  resulted  in  a  reduction  in  bond  yields.  Because  mortgage  rates primarily follow bond yields, rather than increasing – as most observers had expected – five-year mortgage rates in Canada finished 2011 at virtually the same level as they started.  
“The year 2012 will begin in the same manner, which should translate into very low mortgage rates,” said Paul  Cardinal,  manager  of  the  Market  Analysis  Department  at  QFREB. “Home  buyers  will  therefore continue  to  benefit  from  exceptionally  low  borrowing  costs,  which  will  help  to  stimulate  the  number  of transactions,” he added.
Small Increase in Number of Sales
The QFREB anticipates a slight increase in the number of sales on the provincial MLS®  system this year.
Some 79,000 sales are expected to take place in 2012, a 2 per cent increase compared to 2011 and only a 3 per cent decrease compared to the record-setting 80,657 sales in 2007.
In addition to very low mortgage rates, the province’s improved demographic situation in recent years will help  stimulate  the  real  estate  market.  According  to  data  from  the  Institut  de  la  statistique  du  Québec,  in 2009 the province posted its largest increase in population since 1988 (79,779), and in 2010 it registered its best year for net migration in forty years, with close to 43,000 newcomers.
Increase in Number of Properties for Sale
The number of properties available for resale will increase in 2012, as it has for the past several years. Due to  the  increase  in  the  number  of  properties  for  sale,  buyers  will  benefit  from  a  wider  choice.  Market conditions will continue to gradually relax in most of the province’s urban centres, although many of them will continue to favour sellers.
Price Increases Slightly Above Inflation
The median price of single-family homes increased by 4 per cent in Québec in 2011. This was the smallest increase  since  2001  (+4  per  cent).    The  gradual  relaxing  of  market  conditions  should  moderate  price growth. We  expect  a  3  per  cent  increase in  single-family  home  prices in  Québec  in  2012,  with  a median price of $223,000.
“Condominiums will continue to be highly in demand among first-time buyers who are seeking an affordable property and among households whose children have left the home,” said Paul Cardinal.

However,  condominiums  are  also  the  property  category  that  will  have  the  fastest-growing  supply  of  new dwellings.  According  to  the  CMHC,  slightly  more  than  half  of  the  approximately  24,600  dwellings  under construction in Québec at the end of 2011 were condominiums. In many areas, future condominium buyers will not suffer from a lack of choice, and the competition resulting from the construction of these new units will moderate the price increase of existing condominiums.

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Québec Landlords Association (1)

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