We often read in the media that there is an ‘over-supply’ of condos in Montreal, but a quick look at the diverse profile of buyers leads us to believe that might not necessarily be the case.
We tend to believe that condos are primarily sold to a single clientele aged 25 to 30 who are first-time buyers and can afford to buy a roughly 500-square foot unit. While it is true they make up a significant proportion of buyers and that much of the current market is targeted towards them, the condo formula is actually quite attractive to other types of buyers but the supply that meets their needs is limited.
Baby boomers new needs
When I was sales director at our Lowney project between 2005 and 2011, parents accompanying their kids buying their first property would often tell me they were also considering selling their suburban home now that the kids were gone. In general they would share their interest in returning to live on the island in a larger condo than was offered at Lowney. Since launching the Bassins du Havre project I have met many baby boomers in the same situation. The CMHC recently spoke of this new wave of home buyers at a real-estate conference in Montreal. Most ‘retired’ baby boomers are likely to remain in the neighborhood where they raised a family. Nevertheless, many boomers remain active in their jobs or start another job during retirement. For the latter, the decision to move back into the city is not only practical but also attractive. Commuting to work is no longer necessary, and the proximity of theatres, restaurants, museums and other cultural activities becomes even more of a factor, as they are essentially ‘restarting’ their lives as a couple, without kids at home. Most of them look for 2 or 3 bedroom condos so they have the flexibility of an office at home as well as a guest room for their children and grandchildren. Large units ranging from 1,500 to 2,000 square feet are still rather rare in the downtown area, but the growing presence of these kinds of buyers suggests there will be, in fact, an under-supply.
Among our different condo projects we have seen there is also a significant demand for downtown pied-à-terre condos for people who must live in the city a few days a week for professional reasons but then return to their home in the suburbs every weekend. One might think there is only a marginal need for this type of condo, but as they are located in the city center there are in fact a significant number. In general, 300 to 400 square foot condos correspond to the budget of these buyers. The number of projects offering pied-à-terre units are few but the need for this type of housing is growing steadily. In addition, due to the recent tightening of financing rules by the CMHC, more and more first-time buyers are turning to this type of condo because their priority is to live downtown within walking distance of work.
Many couples with or without children would choose to live in the city, as close to downtown as possible, if they could find the type of home that meets their criteria. In general they are looking for a 2 bedroom unit priced between $350,000 and $400,000, parking and taxes included. We could imagine that couples with children favor projects measuring 4 to 8 storeys and offering 850 to 900 sq. ft. units that also feature a fitness centre and daycare. Grocery stores, schools and public transportation need to be close by. This present and growing demand shows there is already an under-supply of these types of downtown condos, forcing many young couples to choose the suburbs.
Reduction of living expenses
Many couples in their fifties are looking forward to a reduction in living expenses. Most like to capitalize on the value of their current property by selling and subsequently purchasing something smaller, most often with little to no financing needed. If they are willing to live with a reduction in space they are more than likely not willing to compromise on the condo or living environment quality. A 900 to 1,200 sq. ft. condo is often mentioned as the ideal living space for this type of client, albeit with the services and atmosphere of life in a hotel. The prevailing belief is there isn’t a large enough market for these types of condos, but when you consider that most people fund their purchase by selling a much larger and more expensive property, we quickly realize it is merely an assumption. The current supply of these condos is probably quite balanced in downtown Montreal.
The condo market needs to adjust accordingly by responding to the needs of an increasingly diverse clientele. Fortunately, this is a product for which we can quickly and easily change the characteristics. As always, demand forces the market to adapt with new offerings.