Montreal condo market catching up to other cities

Montreal’s downtown area condominium market is unlikely to face a glut of unsold units in coming years, despite some concerns the market may be overheating.
That’s the view of Mathieu Collette, director of the Altus Group, who was speaking about the city’s condo market during the recent Quebec Apartment Investment Conference.
Collette notes that while 7,726 condo units will be delivered in the downtown area (including Old Montreal, Griffintown and the Lachine Canal) by 2016, 4,658 of those units (or 64%) have already been sold or reserved. This leaves only 2,568 remaining units to be sold in the next four years, or 642 a year. “That’s not a major concern,” he says, adding that condos are the most affordable means of entry into the Montreal housing market for first-time buyers.
Condo buyers become sophisticated
Debbie Lafave, senior vice president of Baker Real Estate, which represents 10 condo projects in Montreal, says the city’s condo market has undergone enormous changes compared to just four years ago. “Buyers have become very sophisticated, very quickly.” While they used to be happy to have a pool, they’re now very demanding about services and amenities. “Montreal was a bit behind other big cities but is catching up.”
She says there is a surprising demand for penthouses in Montreal condos – a phenomenon that does not exist in Toronto. “People want the best unit and best view and they’ll pay the price.”
Lafave says about 50% of buyers of downtown Montreal condos are individual investors, compared with Toronto where that percentage soars to 85 or 90%. Many of these investors in Montreal use the units for their university age children, while others rent them out or buy them as potential pied-à-terres.
She sees the trend of condos being rented out will continue as long as it is not cost-effective to put amenities in rental buildings.
Michael Broccolini, real estate manager of Broccolini Construction, says rents in Montreal are too low while land and building costs are too high to justify the construction of new rental apartments.
His company is developing the 50-storey L’Avenue, which will among Montreal’s tallest residential condo towers. Sixty per cent of the units in the building, near the Bell Centre, have been sold.
Broccolini says condo investment remains a good bet as land, material and labour costs are only going to increase.
But David Owen, president of Mondev Construction, which has 20 smaller scale condo units (between 10 and 50 units) underway in Montreal, sounds a note of caution.

Two new Mondev condo projects: Station C, 555 units, downtown Montreal and Le Laurier, 16 units, Rosemont, Montreal
New CMHC lending rules take hold
Since terms for CMHC-insured mortgages became stricter recently, Owen has seen a change in potential buyers. Many buyers no longer qualify for mortgages. As well, traffic to his website has declined by 20% in January and February compared to the same period last year. Still, Owen is confident the city’s condo market should remain alright as long as interest rates stay low.
Rental apartments and housing for seniors and students also make for potentially solid investments, as another session on the different side’s of Quebec’s multi-residential market made clear.
The argument is easy for apartment investment in Montreal, says Tyler Seaman, vice-president, multi-residential of Oxford Properties Group, which last year bought the giant La Cité apartment complex in downtown Montreal. Seaman notes Montreal’s condo market is much smaller than Toronto’s, vacancy rates in Montreal remain low and the province has the lowest hydro rates in North America.
As for seniors’ housing, there is tremendous growth potential in Quebec in the next 20 or 30 years, says Vlad Volodarski, chief financial officer of Chartwell Retirement Residences, Canada’s largest owner and operator of seniors’ housing.
Volodarski says his prediction is supported by demographics and that “everybody (in the field) will be geniuses in 10 years.”
Montreal a mecca for students
On the other end of the spectrum, student housing is a solid investment in Montreal, says Martin Lieberman, vice-president of Bemalene Holdings, which runs a 440-bed rental building for students on downtown Ste. Catherine St.
Student housing is recession-proof, promises consistently high occupancy rates and is a wonderful hedge against inflation, Lieberman says. It’s a good source of capital preservation and features a market that will grow.
On the negative side, student housing is beset with high turnover, high maintenance and the laissez-faire attitude of students who have a high sense of entitlement. As well, operators of student housing have to compete with universities that don’t pay taxes and with the vagaries of changing governments.
Still, Montreal is a mecca for students, despite the fact last year’s student protests temporarily caused the city’s popularity to decline among American students, he says.
Lieberman is so bullish on the market that he is looking to expand his student housing downtown. If the city gives approval for 250 to additional 400 beds, “we’re happy,” he says.

Industry Events