Greater Montreal real estate market ends 2023 with property prices above 2022, despite a slowdown in activity
- The price of a property in the Greater Montreal area fell slightly in the fourth quarter of 2023, but remained 4.1% above the same period in 2022
- Compared to the fourth quarter of 2019, the value of a property in the Greater Montreal Area rose 30.6% year over year
- The supply of properties in the region remains well below the 10-year average, which is helping to keep prices stable
- Royal LePage expects a brisk spring market, with the Bank of Canada set to cut key interest rate later in the year
- Elsewhere in the province, the Quebec City and Trois-Rivières markets are the only two regions in the report to have been spared a quarterly price decline throughout 2023
MONTREAL, Quebec, January 15, 2024 – According to the Royal LePage House Price Survey and Market Forecast released today, the Greater Montreal Area’s real estate market ended 2023 with all parts of Greater Montreal ending the year with a year-over-year increase in the aggregate price of a property, with the exception of Laval. All regions, with the exception of the South Shore, recorded a quarterly decline, reflecting buyer fatigue in the face of higher mortgage rates, heavily affecting buyers’ purchasing power throughout the year.
In the fourth quarter of 2023, the aggregate[1] price of a property in the Greater Montreal Area rose 4.1% compared to the same quarter in 2022 to reach $566,700, down 1.5% on a quarterly basis. However, a comparison of the price of a property in the fourth quarter of 2023 with the same period in 2019 reveals a 30.6% increase in property values in the region.
When broken out by property type, the median price of a single-family detached home rose 4.7% compared to the fourth quarter of 2022 to reach $629,700, posting a quarterly decrease of 2.5%. The median price of a standard condominium remained stable in the fourth quarter of 2023, up 1.1% compared to the same period in 2022, and rose 0.1% between the second and third quarters to $450,200. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions, a leading Canadian real estate valuation company.
“The last quarter of the year saw a slight decline in prices and sales in the Greater Montreal Area real estate market as a direct result of inflation and the significant increase in mortgage rates in 2023,” said Dominic St-Pierre, vice president and general manager, Royal LePage, Quebec Region. “Despite this, we are seeing an increase in requests for showings, which reflects renewed optimism among buyers about the real estate market, while a drop in interest rates seems increasingly within their reach for 2024.”
Experts widely expect the Bank of Canada to start cutting its overnight lending rate in 2024, if Consumer Price Index (CPI) data continues to follow a downward trajectory. Inflation reached 3.1% in Canada (3.6% in Quebec) in November, compared to the same month in 2022, while the housing segment included in the CPI rose by 5.9% over the same period (6.8% in Quebec).[2]
“The Bank of Canada’s campaign to reduce inflation has proved very effective,” said St-Pierre, pointing out that inflation reached 8.1% in June 2022. “However, the final stretch towards the central bank’s objective could be more complex than we had hoped. The employment rate remains very resilient, which means that household spending could remain high and continue to stimulate the economy,” added St-Pierre, arguing that the central bank will remain cautious to ensure that it does not stimulate inflation further while trying to ease the cost of living for Canadian households.
“On the other hand, the weight of housing in the calculation of inflation is very important,” added St-Pierre. “If we were to remove mortgage interest costs from the CPI calculation, the inflation rate would already be well below the Bank of Canada’s upper target of 3%.”
A look at the state of the Greater Montreal Area property market shows that the number of active listings for all property types remains well below the ten-year average, and this is despite strong growth in demand due to rapid population growth. In December 2014, there were a total of 30,171 active residential listings in the Montreal Metropolitan Area, compared with 15,907 in December 2023, or 47.3% below the average for the last decade[3].
“Even though consumers have adapted to the new reality of higher mortgage rates, increased borrowing costs are the main factor currently keeping prices from escalating, given that the supply of housing remains extremely low. We expect pent-up demand to show up quickly in the housing market, as soon as the central bank announces a change of course in its monetary policy,” said St-Pierre. “The spring market should be dynamic.”
According to St-Pierre, the slowdown, or even stoppage, of a number of housing projects in 2023 due to builders’ financing costs has exacerbated the housing shortage. He predicts that it will take a long time to catch up, given the growing demand for condominiums from first-time buyers, immigrants and baby boomers. “More and more baby boomers will want to reduce their living space and cut back on maintenance.”
In addition to buyers who had been pushed out of the resale market due to their limited purchasing power, experienced buyers who were able to wait for more favourable conditions will also be coming back at the same time, likely in more expensive property segments. It is therefore expected that all property types will see an increase in value, albeit moderate, in 2024.
St-Pierre expects a slow start to the year in terms of sales, with a strong uptick in activity towards the end of spring, spurred by the anticipated drop in borrowing costs, as predicted in the recent Royal LePage 2024 Market Survey Forecast published in December.
Provincial picture
Across Quebec, the vast majority of markets in the report ended 2023 with increases compared to year-end 2022, in all property segments, while most regions saw slight quarterly declines, reflecting the effects of higher borrowing costs on households. With the exception of Sherbrooke, the regional markets outside the Greater Montreal Area all recorded slight increases quarter over quarter in the aggregate price, where the impact of higher interest rates has been more muted given the relative affordability of homes in these areas. The Quebec City and Trois-Rivières markets are the only ones to have experienced no quarterly decline in property prices throughout 2023.
Provided that the Bank of Canada begins cutting its overnight lending rate in 2024, as expected by many experts, this year should see a return of pent-up buyer demand to the market. This, in addition to a chronic housing shortage, will drive property prices higher. Quebec still faces a shortfall of between 860,000 and almost 1,090,000 homes needed by 2030, according to calculations by the Canada Mortgage and Housing Corporation (CMHC), based on population growth scenarios and residential construction projections.[4]
Read other Quebec regional releases here.
Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2023
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2023
[1] Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Data is provided by RPS Real Property Solutions and includes both resale and new build.
[2] Statistics Canada, Table 18-10-0004-01 Consumer Price Index, monthly, not seasonally adjusted, December 19, 2023
[3] Centris, Active listings for the month of December, from 2014 to 2023, Montreal Metropolitan Area.
[4] CMHC, Housing shortages in Canada: Updating how much housing we need by 2030, September 13, 2023
