COVID-19 and its impacts on the Montreal real estate market.
Prior to the pandemic, the Montreal real estate market was already a strong seller’s market in all property categories with low inventory and many properties selling in multiple offers, particularly on the island of Montreal. When the 2020 spring lockdown came into effect, essentially pausing most real estate activity in Quebec, projections predicted the real estate market would take a dive, given the impact that the pandemic would have on the economy and on employment.
The result was the complete opposite. Let’s have a look at how the Montreal real estate market was impacted by the pandemic.
Shortly after the lockdown lifted, there was pent up demand following the pause and buyers were eager to purchase a home, with many of them looking off the island of Montreal or further out to the countryside up north in the Laurentians and east in the townships. The flight to the suburbs was fueled by a combination of unprecedented low interest rates and working from home in need of more space, including a home office and recreational space.
The Rental Market
The downtown Montreal rental market has also seen a change, with more inventory and vacancy rates up from about 1% to 6%**. This is mostly due to the exodus from downtown as less people need to live close to work, university students are studying from home and short term rentals are converting into long term rentals resulting from a lack of travel. Some landlords are asking less than their property was previously rented for and are offering first month’s rent free as an incentive to find a tenant.
Typically, the summertime and the holiday season are slower months of the year for real estate. However, in 2020, sales in the Greater Montreal area were up about 35%* in July and August. January 2021 has also been an unusually busy month with sales up about 18%* compared to January 2020. In general, professionals working in the real estate industry are backed up including bank appraisers, land surveyors and notaries. For example, a new certificate of location done by a land surveyor used to be ready within 2-3 weeks, whereas now it can take 2-3 months! And the cost has increased.
General Impacts on the Industry
The impact of the pandemic on the real estate industry in general has been continued low inventory, increasing prices and a shift to doing as much as possible virtually. Realtors are now meeting buyers for the first time via Zoom instead of at the office, a coffee shop or at the buyer’s home. In certain situations, when the client is at high risk of having health issues when contracting covid, realtors use virtual methods such as Facetime to view and assess the property’s value remotely. Open houses are now taboo and visits are done by appointment with one group at a time in the home with sanitation measures and strict distancing protocols followed. Virtual tours are an imperative service that realtors should be providing to their sellers when listing a property. Many notaries are offering virtual signing services or meeting buyers and sellers separately, and realtors are no longer able to attend the closing appointments.
Despite the uncertainty, we have continued confidence in the Montreal real estate market given that it is an internationally known city that attracts workers and investors from across the globe. When immigration returns and when the borders open, we will once again have an influx of buyers moving here to work, Americans looking for a pied-à-terre, investors from across Canada and abroad, and parents buying for their students attending university. Moreover, the Montreal job economy remains strong with major companies like Amazon opening 5 new facilities in Quebec, Costco’s new business center, and the other big employers such as Ubisoft, Pfizer, McGill university, Hydro Quebec, Pratt & Whitney, etc.
Even when the pandemic subsides, the low inventory market may not immediately improve, which will continue to be a challenge for buyers. It is imperative for buyers to work with a knowledgeable realtor who can help them win those bidding wars with a variety of methods. For property owners, it is an optimal time to take advantage of the market and sell for top dollar. We are in unprecedented times and the market could shift, particularly if the interest rates go up.
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*Source: Centris Statistics
**Source: Québec Landlords’ Association