Sharp increase in interest rates and less dynamic job creation have cooled activity in major urban centres, economist says.
Residential property listings in Greater Montreal jumped in September as home sales recorded their biggest year-over-year drop in 17 months following another supersized increase in interest rates.
Some 2,537 transactions were concluded in the Montreal metropolitan area last month, a 30-per-cent decline compared with September 2021, according to the latest Centris database numbers compiled by the Quebec Professional Association of Real Estate Brokers (QPAREB) and released Wednesday. Active listings jumped 44 per cent year-over-year to 15,550, paced by a 61-per-cent surge in the number of single-family homes for sale, and are now approaching pre-pandemic levels.
Sign up to receive daily headline news from the Montreal Gazette, a division of Postmedia Network Inc.
Thanks for signing up!
A welcome email is on its way. If you don't see it, please check your junk folder.
The next issue of Montreal Gazette Headline News will soon be in your inbox.
The last time monthly sales fell as much was May 2020, in the early days of the COVID-19 pandemic, when transactions in Greater Montreal shrank 41 per cent, QPAREB data show.
In a rare occurrence, fewer transactions took place last month than in August. It was the first time since 2013 that such low sales were recorded in September, which is traditionally one of the year’s busiest periods as activity tends to rebound after the start of the school year.
“This is symptomatic of a market that’s cooling in a major way,” Charles Brant, QPAREB’s head of market analysis, said Wednesday in a telephone interview. “Demand has dropped significantly over the last few months, and excess supply has started to pile up. The market is not yet in balance, but we’re getting closer.”
Residential real-estate sales have taken a hit this year as successive interest-rate increases make it considerably more expensive for buyers to borrow money. The Bank of Canada raised its key interest rate last month by three-quarters of a percentage point to 3.25 per cent in an attempt to bring inflation under control. Given the outlook for inflation, interest rates “will need to rise further,” the bank said Sept. 7. A year ago, its key rate stood at 0.25 per cent.
“There is no doubt that sharp increases in the Bank of Canada’s policy rate and less dynamic job creation have cooled residential activity in major urban centres in recent months,” Daren King, an economist at National Bank of Canada, said in a note to clients. “Since we expect the central bank to announce another policy rate hike this month, we expect transactions to continue to weaken over the next few months.”
Sales of condominiums and plexes — defined as buildings with two to five dwellings — were hit particularly hard in September, falling 39 per cent and 38 per cent respectively. Single-family home sales dipped 21 per cent.
On the island of Montreal, transactions plunged 39 per cent in September while active listings shot up 34 per cent, QPAREB data also show. Year-over-year sales declines reached 38 per cent in St-Jean-sur-Richelieu, 36 per cent in Vaudreuil-Soulanges, 24 per cent in Laval and 23 per cent on the South Shore.
After four consecutive months of decreases, single-family home prices across the Montreal metropolitan area rebounded slightly in September. The median price of a single-family home last month was $535,000, up six per cent from April. Condominium prices advanced four per cent to a median of $380,000, while plex prices fell one per cent to $685,000.
Even so, single-family home prices in Montreal are down about 10 per cent on average since April, Brant said. Three property sales out of every 10 now involve multiple bids, half as much as this past spring, he said.
“Prices are adjusting,” Brant said. “There’s more room for negotiations. In some cases, people have been able to buy below listed prices, which is something we didn’t see back in the spring.”
September also marked the first month this year that the time required to sell a single-family home increased. The average selling time across Greater Montreal last month was 34 days, up from 32 days in the same month of 2021, QPAREB data show. Forty-four days were needed to sell a condominium, down from 45 a year ago, while the average selling time for a plex dropped to 52 days from 53.
ftomesco@postmedia.com
-
Montreal home sales dropped 20% since August 2021
-
Bank of Canada raises key interest rate by 0.75%, says it likely needs to go higher