Montreal mortgage brokers worried that home prices were growing too fast for clients to keep pace can stop wringing their hands, with new numbers suggesting their hot market is starting to cool.
“Though Montreal’s 12-month inflation was the second highest of the six markets," reads the August report from the Teranet – National Bank National Composite House Price Index, “it decelerated in June for a third straight month.”
That month, the largest 12-month rise in prices was 7.2 per cent, in Vancouver. Montreal’s price gain came in at 5.9 per cent, while Ottawa and Halifax followed at 4.6 per cent and 4.4 per cent, respectively. Toronto’s price growth stood at 4.2 per cent.
While escalating home prices in Vancouver have captured national headlines, those in Montreal were also threatening to slow down real estate activity, as an increasing number of buyers found themselves priced out of the market.
“If prices rise significantly, we could eventually see business slow because the salaries of Montrealers haven’t kept up,” Terry Kilakos, owner of North East Mortgages, told MortgageBrokerNews.ca earlier this summer. “I saw the shift immediately after the government brought in the new mortgage rules: The quality of the clients that we’re seeing became significantly better, but we were seeing fewer clients and a significant slowdown.”
He wasn’t alone, with other mortgage brokers concerned that originations would further slow as a result of increasing prices across most Montreal neighbourhoods.
That growth coincides with stagnant wage growth in Quebec, as the province’s manufacturing and tourism sectors suffer through a slowdown of their own. Montreal wages are, in fact, among the lowest of any major Canadian city.
The federal government’s move to lower the ceiling on amortization to 30 years, from 35, has also eroded the ability of many Montreal residents to qualify for mortgages. Any price growth would further limit the number of new purchases for brokers servicing all but the high end of the market. That hasn’t yet happened, said Kilakos.
The slowing pace of price growth over the last three months has eased those concerns, although they are still there.
“I just don’t see it – prices are already too high,” Jack Lehrer, a broker with Mortgage Rate Montreal, told MortgageBrokerNews.ca. “At a certain point people have to wake up and realize they can’t afford these high prices.”