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State of Health of the Quebec Market A Healthy Economy always favours the Quebec Housing Market

State of Health of the Quebec Market A Healthy Economy always favours the Quebec Housing Market

The year 2007 has been another good year in terms of demand for housing in Quebec thanks to increasing employment and revenue levels. « Recent economic performance alone suffices to explain the revival noticed in the Quebec housing market over the year » said Kevin Hughes, regional economist at the Canadian Mortgage and Housing Corporation (CMHC) in his speech to his organization’s annual conference in Montreal.

Such growth of the Quebec housing market only explains itself by more flexible borrowing conditions and vigorous growth in the construction of residences for elderly people. The construction of residences for elderly people continues to grow in spite of the fact that CMHC specialists foresee moderation in construction. According to Kevin Hughes, this housing segment in Quebec, especially in the Montreal region, has defied lowering predictions by the experts. Big construction companies continue to follow the trend in order to position themselves for the long term since they have the financial capacity to absorb growing vacancy rates.

Vigorous housing demand in Quebec is also stimulated by the growing birth rate, with a 7,9 % increase representing 82 000 births in 2006, since the birth of a first child often incites young families to decide about the acquisition of property. This increase in the birth rate can be explained by the introduction of the parental leave program by the Government but also by a certain re-invigoration of too low a birth rate[, i.e. one that situates itself below replacement level].

In 2008, however, the CMHC foresees declining demand. « We believe that employment rate growth will be slower in 2008 because of weaknesses in the exportation sector which will affect housing demand. As far as socialized housing is concerned, the present residential stock for elderly people is expected to slow down construction in this market segment. Finally, taking into account the census figures on families from Statistics Canada, we think that demand catching-up is more than finished and thus that the rhythm of present construction cannot be sustained », stipulates Kevin Hughes.

In 2007, about 52 000 dwellings will have been constructed on the scale of the province, and one foresees 48 000 for the year 2008. As far as sales are concerned, 81 000 transactions should have been concluded by the end of this year with the same amount expected in 2008.

Outside the big centres residential construction is vigorous and one foresees as much success on this level in the years to come. There is an interesting point mentioned here by the CMHC: during the third quarter of 2007, the level of activity in small towns like Saint-Jean-sur-Richelieu and Drummondville (with respectively 900 and 781 construction sites), will have bypassed more sizable cities such as Trois-Rivières (731 construction sites) and Saguenay (556 construction sites). More affordable rates and residential construction for elderly people have made the difference on these levels of activity.

In the other regions of Canada, results are similar to the ones in Quebec, with important degrees of activity in the housing sector. A record will be set in 2007 as far as the number of foreseen transactions (according to the data from the Service inter-agences S.I.A.) is concerned, as it will reach 521 000 transactions. In 2008, the CMHC thinks that this level of transactions should diminish somewhat, leveling off at 500 000. « Mortgage repayment rate increases will cause a slight demand crunch for dwellings owned and occupied by their owners and allow the sales market to reach its equilibrium which will slow down rental rate increases for dwellings estimated at 10 % in 2007 and 4,2% next year”.

Finally, for a 7th consecutive year, the number of construction sites should reach the level of 200 000 before climbing to 225 700 in 2007 and 214 300 in 2008.

About the author

Berthold Lévesque

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