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In Montreal’s crowded condo market, size matters

In Montreal’s crowded condo market, size matters

 

MONTREAL — When Sam Scalia’s first downtown highrise sold just 10 condos last year, the veteran developer pulled the project from the market until he could find a way to offer his buyers less.

The founder of Samcon Inc. is relaunching his 230-unit Drummond condo project next month with units that are each about 100 square feet smaller and by up to $40,000 less expensive.

“We knew we had a problem,” Scalia said of the project at the corner of Drummond St. and René-Lévesque Blvd. “And we knew this because the consumers were telling us. What the consumer wants is a better price for a similar product. So we made the units more affordable by reducing the size.”

The Drummond relaunch taught Scalia a key lesson at a time when Montreal condo buyers have never had so much choice: in the competitive downtown market, size really does matter.

Even as Samcon scales down, developer Canderel Group is leaning toward larger units for the second phase of its Tour des Canadiens tower just south of the Bell Centre, industry sources say.

Their projects are two of seven downtown high-rises planned for René-Lévesque Blvd., in the increasingly crowded vicinity around the Bell Centre. Yet the number of existing downtown condo properties for sale “exploded” by 41 per cent last year, putting downward pressure on prices, a Desjardins Economics report on the Quebec housing market said Tuesday.

“New construction will continue to be weak this year across Quebec, with no turnaround expected until 2015,” the report said.

To attract a wider range of buyers, developers in Montreal and other large Canadian cities are also looking at micro-condos, which at less than 500 square feet are affordable enough to draw investors and young professionals, but can be a tough sell because risk-averse banks won’t finance them.

Banks believe these units would be harder to resell because of the higher amount of wear and tear that comes with living in one small room, mortgage brokers told The Gazette.

Samcon, which has 14 projects underway in Montreal and Ottawa, decided to scrap studio apartments in favour of the smaller one-and-two-bedroom units at the Drummond project. Scalia said he believes the project’s one-bedroom apartments, which are being reduced in size from 620 to 555 square feet, are a better investment for buyers.

Yet 350-square-foot micro condos are a feature of developer Devimco Inc.’s latest 140-unit project on Peel and Wellington Sts. in Griffintown.

These mostly furnished micro-condos attracted interest from investors, the parents of university students along with young professionals but buyers had to find alternative sources of financing, said Debby Doktorczyk, president of McGill Immobilier which is selling the units.

“The banks will finance the construction of the condos, but they won’t finance the actual sale of the units,” she said.

Doktorczyk say the banks’ attitudes toward lending have traditionally lagged behind the market. In the past, banks wouldn’t finance 600 square foot units, or even lofts she said.

“Today 600 square feet isn’t a problem, but they won’t touch 400 square feet,” she said. “With time, we see they end up evolving.”

 

Source: The Montreal Gazette