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As condo construction eases, first-time buyers left out in the cold

As condo construction eases, first-time buyers left out in the cold

As condo construction eases, first-time buyers left out in the cold

On Montreal Island, new condo construction slipped 5.8 per cent, year to date, compared with record-breaking 2011.

Photograph by: John Mahoney

MONTREAL — First-time buyers continued to be edged out of the Greater Montreal housing market in November, with condo sales plunging 20 per cent on an annual basis, even as new construction softened below last year’s record-setting pace.

On Montreal Island, new condo construction slipped 5.8 per cent, year to date, compared with a record-breaking 2011, after certain areas of the city, including the downtown Ville-Marie borough, Côte-St.-Luc and Notre-Dame-de-Grâce and Côte-des -Neiges shifted this fall to buyer’s markets, the Greater Montreal Real Estate Board and Canada Mortgage and Housing Corp. said Monday.

Most economists said they expect a continued softening of resales and new home construction in Montreal and some of Canada’s other major housing markets — as starts dipped below 200,000 annualized units nationally for the first time in a year.

At 196,000 units, the national numbers represented the third straight monthly slowdown in homebuilding.

“Residential construction is acting as a drag on Canadian growth, but at this point, the landing in the sector still looks soft,” BMO economist Robert Kavcic wrote in a note.

Kavcic added that single family starts, or units, also slipped by 5.4 per cent in November, to the lowest level in 16 years, excluding the recession from December 2008 to July 2009.

In Greater Montreal, while the amount of single family homes available for sale remained stable compared with last year — the median home price for November rose three per cent to $277,000 — even as resales dropped by 18 per cent on an annual basis across all price ranges. By contrast, in the condo market, the drop in sales was more pronounced at the lower end, indicating that first-time buyers are being shut out, following tougher financing rules introduced by Ottawa this summer. While the median price of a Greater Montreal condo rose six per cent, on an annual basis, that growth stems from an increase in sales of more expensive units.

“The decrease in condominium sales was most evident in the $100,000 to $200,000 price range, while sales actually increased for condominiums priced at $500,000 or more,” said Diane Ménard, vice-president of the real estate board’s board of directors.

Condo inventory rose 23 per cent in November, year over year, giving buyers more choices, although the market remains balanced (based on a 12-month average), the board said.

In a note, National Bank Economist Matthieu Arseneau said he expects the Montreal condo market would soon follow the trend in the Greater Toronto Area, where declines in the multiples segment contributed to a 14.3-per-cent drop, between October and November, in the seasonally adjusted annual rate of urban starts in Ontario.

“Despite a highly accommodative interest rate environment, sales in the resale condo market have dropped sharply and the inventory of unsold new condos (including presale and uncompleted units) in GTA has swelled,” he wrote. “In our view, promoters will continue to adjust new supply to subdued demand. A comparable situation should occur in Quebec in the coming months given the similar situation in the resale market.”

In Greater Montreal, new condo construction remains strong this year, dropping just one per cent for the first 11 months of the year, compared with the same period in record-breaking 2011.

In the province of Quebec, the seasonally adjusted annual rate of urban starts — a measurement used by analysts to weed out the cyclical highs and lows in real estate — rose 15.4 per cent between October and November.

“According to the various measures that we take, it still can’t be said that a definite slowdown is taking place in apartment construction. That being said, we do observe a convergence of telling signs of a near-term decline in this segment. We are thus still of the opinion that levels will be lower next year,” said Kevin Hughes, CMHC’s Regional Economist for Quebec.


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