Press review of late October

In this end of October press review, we look back to the appointment of ministers following the provincial elections, the latest figures on real estate transactions in the province which show a cooling of the market; the statistics on housing starts which evoke an obvious slowdown; the Global Real Estate Bubble Index issued by the Swiss bank UBS; the announcement of a new increase in the Bank of Canada's key interest rate; and the new property assessment roll in Montreal.

A ministry dedicated to housing

CORPIQ is pleased that the housing sector has now become a ministry and has expressed its satisfaction with the nomination of France-Élaine Duranceau as the new Minister of Housing. Already in September, at the public hearings of the Communauté métropolitaine de Montréal, CORPIQ had pointed out the advantages of the creation of a ministry dedicated to housing through its memoir. Several housing organizations have responded positively, including the Association des professionnels de la construction et de l'habitation du Québec (APCHQ) which hopes to begin a collaborative effort to address the housing deficit issue, "a major contributor to the affordability situation in Quebec," according to a press release issued by the organization.

 

The slowdown in the real estate market

Sales in Quebec were down 18% this quarter compared to the same time last year. The numbers are even lower than the pre-pandemic average, notes this article from La Presse. According to the principal economist of the Desjardins Group, "the market is cooling down quite drastically [...] it is only the beginning of a correction period". The Association professionnelle des courtiers immobiliers du Québec (APCIQ) reports that the median price of a single-family home was reduced by 10% in the July-September period compared to the previous quarter. We even talk about of a first quarterly correction in five years. On the Sherbrooke side, we are witnessing the first decrease in real estate prices since 2019. In the Outaouais region, there is talk of a 17% decrease in the third quarter of 2022. Elsewhere, in the most affordable region of Quebec, the Saguenay has seen a stable number of sales. In June, it was the most affordable residential market in Canada.

 

Starts of construction

While most of the key players in the real estate industry are calling for an increase in the supply of housing on the market, construction starts, although so necessary, are decreasing. The

Canada Mortgage and Housing Corporation (CMHC) has noted a decline in apartment construction (-9%) during the year 2022 in the six largest centers in Canada. The same on the side of the APCHQ which notes a 31% decrease in rental housing construction in September 2022 compared to the same month last year. The largest decrease was noted in Gatineau with a variation of -74%. Surprisingly, housing starts exploded on the other side of the Ottawa River when Ottawa experienced an increase of 136%. Continuing on the list of Quebec metropolitan areas, we find Trois-Rivières (-49%), Sherbrooke (-42%), Quebec City (-39%) and Montreal 
(-27%). It should be noted that only the Saguenay region, the most affordable region in Canada, has experienced an increase with a variation of +110% compared to September 2021.

 

Toronto real estate bubble

The Swiss bank UBS has compiled a list of cities in the world that are most exposed to a real estate bubble. In this ranking, Toronto comes in first place and Vancouver in sixth place, says the article from Radio-Canada. This international index placed the two Canadian cities as the riskiest cities in North America, notably because of local real estate prices fueled by speculation and low interest rates during the pandemic. In an article from TVA Nouvelles, we read that the price of real estate has more than tripled in 25 years.

 

Bank of Canada raises its key interest rate

The Bank of Canada raised its key rate by fifty points (0.5%) to 3.75%. Interviewed by Radio-Canada, the Governor of the Bank of Canada said that while further increases are likely in the coming months, this should not be seen as the start of a major recession. The Canadian economy is expected to remain flat until early 2023. In its Monetary Policy Report, the Bank of Canada expects the Canadian economy to grow by only 1% in 2023, according to this article from La Presse.

 

New property assessment roll in Montreal

CORPIQ was mentioned in this article from Le Devoir where the increase in property taxes is discussed. This new roll notice could be challenged by some landlords who feel that it is not representative of reality in a context of cooling market. CORPIQ's director of public affairs also adds that "the increase in the property value of a property can have the effect of increasing the home insurance premiums and school taxes imposed on landlords." There is a portion of the rent that will eventually be reflected in this municipal tax increase.