"The rebound we saw last year from our perspective was a result of the market catching up, so people who would have been buyers in 2008 postponed their purchases (until 2009)," says Kevin Hughes, regional economist in Quebec with Canada Mortgage and Housing Corp. (CMHC).
He adds many buyers also likely saw 2009 as their best chance to get into the market before prices started to push up again, as they already mostly have. Still, there's reason for optimism for investors in this Quebec market, as stock is still scarce.
Hughes says the CMHC is forecasting a four per cent average price growth in the resale market this year in Quebec. Much of the activity expected the rest of this year in Quebec will likely be in the affordable segment. A significant number of households are approaching retirement age, says Hughes, thus are downsizing and looking for smaller units or condos. But the local economy could also play a part in that.
Areas such as Quebec City, affected less by the global economy, have proven strongest. Quebec City has the lowest vacancy rate in the country for rental properties, well below one per cent.
However, Hughes says more industrial areas such as Trois-RiviÅ res have proven more susceptible to a downturn.
Investors need to really understand these and other disparities in Quebec, as certain regions have been attracting new residents and thus more real estate growth more than others.
"There could be somewhat of an age explanation, but there's a lot of economic explanation as well," says Hughes.
"Migration is another. We've seen Quebec City is attracting people, the labour markets are attracting people to the region and obviously that's attracting housing demand."
The top destination of migrants in Quebec is Montreal, of course, where the rental market is still tight and supply remains limited. Transactions in Montreal are way up, although it's important to remember they are being compared to a recession year.
"We are seeing growth in single-family homes as well as in condominiums," says Justin Comeau real estate agent with Groupe Sutton.
Investors, however, are being primarily drawn to condos, he says. Low financing costs and strong upward appreciation are big reasons. But Bertrand Recher, senior market analyst with CMHC in Montreal, says everything has been selling well lately.
"There's a lack of supply, so we're in a situation where demand is high with every sector - condos, homeowner homes, duplexes and rental units," he says. "They are all in a sellers' market territory."
The rental market has remained a key factor for investors. Montreal has one of the highest percentage of renters in Canada - according to the 2006 census, 47 per cent of its residents were renters, compared to 32 per cent nationally.
Much of the new demand is from migrations, mostly from outside Canadian borders. But locals in Montreal will also find homeownership becoming increasingly difficult as prices have again risen and mortgage rates are expected to go up as well.
"The rental market is very tight in Montreal and will remain that way," says Recher. Rents are up 2.7 per cent from October 2008 to October 2009, according to the CMHC.
Yet construction for the traditional rental market has been just 2,000 units a year in a city that has 750,000 rental households. "If you just add 2,000 units, that's quite small," says Recher.
Many builders find restrictions on apartments too costly, and prefer other types of property such as condos or houses.
Much of the construction in Montreal has also focused on senior housing, a sector that is also growing.
Looking at the current market, the upturn in overall buying activity this spring is not unusual in Montreal, where the market has historically peaked between March and May due to the unique tradition of many moving in by the 1st of July, coined moving day.
John B. Joseph, an experienced agent with Groupe Sutton - Centre-Ouest Inc., says Outremont is one of the hotter markets in Montreal that he's seen lately, where prices increased 26 per cent in 2009 while inventory remained low.
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To sum Quebec's market up, there were sharp decreases in sales and, in some cases, prices in the later part of 2008, and an equally sharp rebound in 2009, but don't expect another bouncy year in 2010.