With over 35 years of experience as a real estate promoter, I came to the conclusion that the success of the real estate market rest upon three factors: interest rates, demography and consumer confidence.
First of all, interest rates are presently favorable to buyers (for example, Bank of Montreal’s rate is 2.99% for a 5 years loan) and no increase is predicted for the moment.
Secondly, in terms of demography, the number of residents in Montreal is growing by approximately 30 000 people annually. About 40 000 immigrants arrive in Montreal each year and the difference between births and deaths is plus 9 000. On the other hand, we note a migration towards suburbs of approximately 15 000 people per year and of 5 000 people to other provinces. Migrants mostly settle in Montreal; this applies a certain pressure to the real estate market considering that construction of rental properties is not in progression. Montreal will keep attracting immigrants because of its clear orientation towards the new economies; aerospace, technologies and communications.
The level of consumer confidence is now characterized by an uncertainty regarding the stability of the market considering that the supply of condos is high.
One must remember that it is the surplus of inventory that puts pressure on the prices rather than the surplus of supply. Let’s look into the case of Griffintown, often cited by the media. According to a report by Altus, there were only 59 condos in inventory (i.e. built and unsold) on December 31, 2013. For 1 058 units in construction, 430 were unsold, a number best explained by the fact that banks require between 60 to 65 % of sales in order to begin constructing. Since the construction of most projects take 18 to 24 months, this leads to a very low inventory level. Unsold units should not be considered as part of the inventory as long as the project is not delivered. For example, phase 1 of our project Lowney sur Ville, totalizing 199 units, is 86% sold. Delivery beginning in November, we are very confident that there will be very few or no units in inventory in 6 months. Furthermore, in a recent report, the Conference Board of Canada excluded the possibility of a real estate bubble.
We are very confident that the level of consumer confidence will strengthen in the course of 2014. In addition to the satisfaction of living in the condo, owning a condo represents to owner-occupants a great part of personal wealth. In 1978, I was selling my first semidetached houses 32 900$. Imagine what they are worth today…