Quebec City: Capital Gains

Demographics are a key factor in investor decisions to buy in Quebec.

The province's capital city can count on steady employment prospects thanks to government, but research by the Conference Board of Canada suggests it's the growing population of retirees that's keeping the condo market humming.

"Condos are becoming entrenched in most communities," the Conference Board's annual review of metropolitan condo markets (undertaken in partnership with Genworth Financial Canada) remarked two years ago when the population stood at 738,000 people.

This year, with the population cresting 754,000, the report highlights strong demand for resale condos in Quebec City.

"While new construction will drop this year, the resale market will continue to expand. Looking ahead, both markets will benefit from stable economic growth and an aging population," the report states.

But the economic fundamentals can't be ignored. Quebec City's GDP saw little decline during the recession of 2009, and even while the unemployment rate is set to hit 5.3 per cent this year, the overall number of people employed in the city continues to grow.

While manufacturing was hit, it's the service sector that will buoy economic growth. With the rising tide of workers comes the opportunity to house them.

"The Qu‚bec CMA has the tightest rental market in the province," reported the Canada Mortgage and Housing Corp. last fall. "The economic conditions prevailing in the area have contributed to maintaining demand for rental housing, with the low unemployment rate and solid job market having stimulated the formation of young households and the migration of workers to [Quebec City]."

The report added that a rise in youth employment also created favourable conditions for landlords; "Young households with a primary maintainer younger than 25 years are most often (nine times out of 10) renters."

While a surge in the construction of new rental units have pushed up vacancies to 2.8 per cent this spring from 0.1 per cent last fall, the high cost of housing will help keep occupancies high.

The average resale price of a home in 2009 was topping $211,000 but the coming five years could see that rise to just short of $240,000. These prices are only marginally cheaper than for new homes, which are typically $1,000 to $2,000 more expensive.

Together with rising borrowing costs, tenants have faced hurdles in efforts to move out of rental housing, giving investors who acquire suitable properties solid assets.

Moreover, with many seniors opting to rent rather than buy when they downsize from a family home, the opportunities for investors providing units to the market is strong.

Average rents in Quebec City run between $486 a month and $803 a month.

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