The year 2020 was very special in all areas due to the context of the pandemic, but it was not negative for real estate, on the contrary. Confinement, teleworking or even the search for larger spaces among other factors have had a definite impact on the real estate market in 2020. They will also have consequences for 2021… Meeting with Julie Gaucher, vice-president of groupe sutton - québec.
The impacts of the pandemic on the real estate market in 2020
Julie Gaucher confirms it to us, the pandemic has had a lot of impacts on the 2020 real estate market but which are generally quite positive with some nuances all the same. “Although activity stopped for a month in the spring, the market by the end of 2020 had fully recovered. 2020 was even a record year in terms of real estate transactions. According to MLS data, 110,000 transactions were carried out in 2020 in Quebec. This is unheard of! ”
A tight real estate market
The co-founder of the Sutton - Quebec network noticed several phenomena, especially concerning the difficulty of obtaining the coveted property. “The most complicated transactions were for first-time buyers or for people who needed to make a new purchase. The complexity was also felt for certain popular districts and of course in tourist regions. We have arrived at a system of multiple offers and overbids that bordered on all logic. With a drop of 30 to 36% in the number of registrations across Quebec, the offers have multiplied. There was a lot of disappointment felt on the part of buyers, especially on the favorite ones. ”
There are several reasons for this drop in registrations, including, among other things, the putting on hold of retiree sales plans. “With the crisis experienced in RPAs, residences and CHSLDs, older people and retirees who were thinking of selling their house to go into a condo or a residence have put their decision on ice. Another reason is of course all the uncertainty caused by the pandemic itself, but also the fear of selling and not finding another property. These fewer properties created scarcity and some pressure in the market. ”
This is how a price increase was recorded in 2020 compared to 2019 with a median price of $ 610,000 for Greater Montreal and a median price of $ 825,000 in the heart of the island. The attractiveness of regions such as Saguenay, Central Quebec, Estrie and the Laurentians has resulted in an exceptional price increase of up to 12% for these places.
“The sales delays have completely melted away; a new property leads to visits and offers the day after it goes on sale, if it is not the same day, ”adds Julie.
As for the sellers, they were able to benefit from this price increase but only moderately because they also suffered in the purchase of a new property. So there is a certain price balance between selling and buying.
Ms. Gaucher draws our attention to a category of property that has seen its purchasing process steps reduced. “Multiplexes sell for absolutely ridiculous prices. There are no longer any economic models that hold up to assess their fair market value. In a normal market, you rely on an income multiplier, but today it's the one who pays the most and who puts the fewest conditions. " The pressure is such that certain conditions are deliberately put aside, for example an inspection or careful reading of all documents. The direct consequence has been the cancellation of several sales. “The sellers were very happy with this context in 2020 but the buyers suffered additional stress.”
Banks being cautious within the context
Buyers often find themselves faced with an emotional situation with a first feeling, that of the ‘love at first sight’, leading to go beyond their financial means. “The problem is, when buyers go into cool headed thinking, between the time of an accepted offer and the notarial deed, they find ways out that normally wouldn't be acceptable. But the sellers let it go as more offers follow, creating a lot of dissatisfaction all the same. The market is completely out of order. ”
Julie Gaucher explains a consequence to us: the prudence of banks. “Banks are tightening their criteria. They have seen this unreasonable enthusiasm and do not want an economic crisis like the 2008 one that many countries suffered. Increasingly, banks are demanding approved appraisals, which increases financing times. They can go so far as to refuse a mortgage application if their customers get a lower price for their offer, for example after an inspection. "
Focus on AirBnB rentals
Small investors who have purchased a property for the purpose of renting in AirBnB find themselves in a special situation as these short-term rentals are currently prohibited. “These investments are made with short-term rental profitability calculations, therefore with higher income. When these properties find their way into the traditional rental market, rents do not cover mortgage payments, taxes and other fees. The positive side for brokers is to go out and find good listings and bring together sellers and buyers for whom they have buyer brokerage contracts. There are currently almost 40% of rental properties that are currently empty; owners may be interested in selling. This approach would try to bring back a more balanced market between supply and demand. "
Changing purchasing criteria: new trends in real estate searches
Teleworking and confinement will have got the better of small areas in town. The trend is towards wide open spaces and a return to nature. “We are seeing an exodus from Montreal to the regions. More than 35,500 households left Montreal in 2020. Two or three years ago, properties in the regions remained on the market longer, while today we are witnessing a shortage in certain markets. There is an appetite for more touristy centers such as the Laurentians and Eastern Townships, and the cities that have benefited the most from this exodus apart from these two regions, are among others St-Jérôme, Laval and Bromont. "
New purchasing criteria come into play, particularly with regard to lifestyle. “People want green spaces, larger rooms, they want to be able to go out on their land, to cultivate their vegetable garden, to enjoy a different environment. Building land is also in great demand. ”
Real estate market outlook 2021
An increase in registrations?
If the fear of prolonged lockdown is felt, it could impact the balance of the housing market in 2021. “I don't know how far people can hold out financially. There will be owners who will no longer be able to pay their monthly payment and who unfortunately will have to let go of their property. In 2020 the banks agreed to postpone mortgage payments, the government put money in the system but if the lockdown and curfew continues, there will be no more money. "
A decline in foreign investors
The average price increase of 14.45% in Greater Montreal compared to 2019 is the highest increase in major cities in Canada, more than Toronto and Vancouver. “These cities have implemented taxes for foreign investors. Montreal had abandoned the idea of this tax because we did not have an overheated market. If the price increase continues, we could see this desire reappear. We have already lost a lot of foreign investors in 2020 to travel restrictions, and such a foreign investment tax could keep them out. "
Off-plan sales to watch
Our interviewee draws the attention of buyers of new projects to two phenomena that are currently happening. “People who buy off-plan are often disappointed because the square footage they believe they've bought is gross, not net. The difference can be anywhere from 10 to 20%. So pay attention to the price per square foot since for example on an area of 1000 sq. ft and a median purchase price of more than $ 825,000 this could mean a price paid of $ 907.50 to $ 990 per sq. ft instead of the $ 825 of the sq. ft on plan. It is often when it comes to reselling that people become aware of this phenomenon, thus devaluing their return on investment "
The second danger is that some projects that have started may not see the light of day ...
“Banks are withdrawing their funding from some projects now. The problem is the deposit that the buyers gave with the possibility of losing that amount. ” Therefore, notice to buyers on plans for projects that have not started or at the start of construction. Getting good advice can save you money.
Business real estate context
“Many premises are empty and an article recently announced that between 23 and 30% of neighborhood businesses will close their doors in the coming year. There will always be great opportunities, new businesses that will need premises but perhaps with a different use. With the high taxes and maintenance costs that landlords have to bear, rents can hardly go down. One can imagine the search for smaller premises and the introduction of rotating teleworking in companies. Other more commercial companies have decided to take advantage of this desertion of the premises to start renovating their premises. "
What would Ms. Gaucher advise buyers for 2021? “I would say don't buy under pressure. Stay a year longer in rent to have a good down payment, not to exceed your budget, not to make emotional purchases. Get pre-qualified before you start shopping. Not dropping the inspection condition is also important. Even if you lose the good you wanted, you have to watch the signs. There will most likely be great opportunities in 2022 and 2023. You have to follow the normal stages of reflection in such an important purchase project, and above all be well advised and supported by your real estate broker. "
For sellers, Ms. Gaucher recommends not just being blinded by the price offered for their property, however tempting it may be, but looking at the quality of the buyers, and especially checking out what their relocation options are once they have sold their property. sold. What they have gained on the one hand, they will probably have to pay a premium to find another equivalent property since the bidding exists on both sides, unless of course they opt for a market where the median price of properties is lower.
After a quiet market during the holiday season, the recovery has been keener since January 11th.