The Quebec real estate market in 2021 and its outlook for 2022
The year 2021 has been marked by a second year of pandemic and its consequences on several sectors including the real estate market. The overheating market, rising bidding and increasing property prices have made headlines more than once, causing concern for first-time and experience buyers.
Will the real estate market stabilize in 2022? Will the pandemic still have an impact on the market? Can we expect mortgage rates to rise with inflation?
Here is an overview of the real estate market in Quebec in 2021 and its outlook for the year 2022.
Highlights of the real estate market in 2021
The year 2021 was characterized by a hot market with a low level of active listings, a high number of property sales and an unprecedented increase in sale prices in most regions of Quebec.
Lack of properties on the market
The health crisis has had a significant influence on the availability of properties on the market over the past two years. In fact, a 29% decrease in the number of properties on the market was recorded on Centris in 2020 while in 2021 a 36% decrease was observed (compared to 2020).
In September 2021, the Quebec Professional Association of Real Estate Brokers (QPAREB) submitted a study to the Ministre des Finances du Québec on the analysis of the situation. According to the analysis, the lack of properties combined with an unprecedented demand is the main cause of the real estate overheating.
The analysis noted the impacts of the crisis on supply:
- Insufficient housing construction due to delays and costs has limited new supply with a shortfall of between 40,000 and 60,000 units.
- The situation in retirement homes has caused many fearful seniors to postpone their plans to move.
- In general, the health crisis has slowed down many sellers' plans for fear of infection.
- As the confinement brought a significant emotional burden, several couples separated, creating the need for one spouse to find a new home.
Significant increase in property sales prices in most regions of Quebec
The median selling price of properties continued to increase significantly in most of Quebec in 2021. On average in the province, the median price of single-family homes increased by 24% to reach $365,000, while that of condominiums increased by 21% to reach $328,000.
Very low mortgage interest rates and the increase in disposable income of many households are directly related to the situation, according to the QPAREB's report published in December outlining the real estate market in Quebec in 2021. Since 2020, low financing costs and a low inventory of properties have created a context conducive to overbidding, thus causing prices to rise.
| Metropolitan Areas | Median Selling Price in 2021 |
| Gatineau | $400,000 (+28%) |
| Montréal | $495,000 (+24%) |
| Québec | $311,143 (+15%) |
| Saguenay | $213,250 (+14%) |
| Sherbrooke | $305,000 (+25%) |
| Trois-Rivières | $220,000 (+26%) |
| Province Average | $365,000 (+24%) |
High number of property sales despite low inventory and rising prices
While 2020 saw an all-time high in the number of home sales with more than 112,000 transactions, 2021 concluded with just over 109,000 sales according to Centris data. The strength of the market has belied predictions. The low number of active listings and the increase in median prices would have led to a decline in sales in 2021, according to Charles Brant, Director of the QPAREB's Market Analysis Department.
What does the real estate market in Quebec have in store for us in 2022?
The rise of the pandemic will certainly continue to have an impact on the Quebec real estate market in 2022. According to forecasts, however, the market should regain a certain stability. Although the situation will remain favourable to sellers, the level of property inventory should increase and the price explosion should slow down.
The expected rise in mortgage rates
With the Omicron variant taking over and inflation rising, the Bank of Canada has announced an interest rate hike in 2022, potentially as early as the beginning of the year. With this announcement, mortgage rate increases can be expected, ending the era of low rates.
A favorable situation for the rental market
Many young households will choose to rent rather than buy as home ownership becomes more difficult. With the unprecedented increase in property prices, the gap between monthly mortgage payments and rents is widening. Add to this the rising cost of living and the lack of available properties.
The resumption of immigration expected in 2022 should also be favourable for the rental market: newcomers mostly opt to rent before starting the process of buying property after a few years.
The situation for markets outside of Census Metropolitan Areas (CMAs)
As in 2021, areas on the outskirts of CMAs and even remote areas will continue to benefit from the arrival of many households, attracted by more affordable prices and in a context where remote work is becoming a permanent feature.
The low level of available properties, raising prices for single-family homes and the price of gas, however, will slow transactions in these markets, the QPAREB estimates in its 2022 real estate market forecast.
A more moderate increase in property prices
The QPAREB estimates that the median price of single-family homes will increase by 3% at the provincial level.
This stabilization is explained in part by the expectation that the number of buyers will decrease, due to the high number of transactions in recent months and an expected increase in interest rates, creating an environment that is less favourable to overbidding in 2022. Also, retired households encouraged to selling in order to cash in on a large capital gain and the acceleration of new housing construction will contribute to increasing the supply of properties on the market.
The advice of the Vice-President of Sutton Quebec to buy or sell in 2022
When asked about her vision of the 2022 market, Julie Gaucher, Vice President and Chief Operating Officer of groupe sutton - québec, said right away:
"When will the right time to buy come again? All things come to those who wait, as the famous saying goes.
Opportunities will always be present in the market, and I would once again advise avoiding emotional purchases. Unless you are faced with a case of major force, such as a divorce, a death, a relocation for work, etc., patience is a virtue and even a strategy that could pay off in the medium term.
I agree with the seller's question about whether now is the right time to change properties. Ask yourself: Would you be willing to rent for a year or two? If the answer is yes, then take the gain from the sale of your property, make that money work for you and wait for the opportunity that will be right for you.
Of course, this is all theoretical since each situation is different. Moreover, it is easier to analyze the market after the fact than to predict it in advance. No one has a crystal ball, but it is always a matter of making the best decision according to one's own needs and constraints, and according to the moment in front of you, while being as well informed as possible thanks to the tools and advisory services of your broker, the real estate professional."
Sources:
Centris, Real Estate Statistics
QPAREB residential barometer of the 4th quarter of 2021 according to Centris data
