Montreal condo market shows signs of strain
We saw some insights into how Montreal compares with other Canadian cities in a study of housing markets this week by the BMO Capital Markets. One that might be of concern is that Montreal actually has more vacant condos than either Vancouver or Toronto and a rental vacancy rate among condos that’s twice as high as those in either of these cities. The vacancy rate is important because a key support for the condo market is that real-estate investors will often buy condos to put them up for rent.
The vacancy rate for condos in Montreal, however, is more than 2 per cent, compared with 1.1 per cent in Toronto and 0.9 per cent in Vancouver, says BMO economist Sal Guatieri. This is not disastrous for Montreal, but it is a sign that an important support for the condo market is not as strong here as in other big Canadian cities. Guatieri said he wouldn’t consider the rental market to be really unhealthy, though, unless the vacancy rate approached 5 per cent, a level where rents would likely be under pressure to decline.
Another interesting comparison is that Montreal home prices in general have gone a long way toward catching up to the Canadian average. Ten years ago, the average Montreal home sold for 2.4 times the average family income. At that time the average for Canada was 3.2. Over the intervening decade, Montreal prices have shot up by 153 per cent compared with a 104-per-cent gain across Canada.
Today, Montreal is one of four cities that the BMO report identifies as having “elevated” price-to-income ratios. They are Vancouver, with a stunning ratio of 10 times income for the average home, Toronto at 6.7, Victoria at 5.7 and Montreal at 4.5. While Montreal is now much higher on this measure than it once was, its ratio is still below the 4.9 average for Canada.
Keep in mind, though, that this Canadian average is heavily influenced by the big, pricey Vancouver and Toronto markets. Other cities with healthier economies and higher household incomes than Montreal have homes that sell at lower ratios. Examples would be Calgary at 4.1 and Ottawa at 3.4.