Montreal-area housing in 'vicious cycle' of rising prices and low vacancies: expert

Home prices in Montreal are rising fast as buyers grapple with a serious inventory shortage which could have broad effects on families, renters, and the future of Montreal’s housing market.

"Prices have been rising at astronomical rates, making it very difficult for buyers," said local Royal LePage broker Sean Broady.

Montreal-area aggregate prices are up 18.5 per cent over last year — a shift attributed to a dwindling supply of available units. However, Broady said the market has entered a "vicious cycle" where skyrocketing home prices have resulted in further-plummeting vacancy rates.

"Most properties that come on the market are seeing multiple offers," said Broady. "So buyers are having to compete in these bidding wars, losing out often to other bidders who are bidding well over the asking price."

"But even sellers, if they've then got to sell and buy another property … they're running into the same situation," he added.

"They're very hesitant to put their existing property on the market for sale because they're scared they're not going to be able to find something to move into."

In other words, sellers are on the market looking to bid before listing their own residences for sale. In doing so, they’re increasing demand, without adding supply.

It also means family buyers are at a greater disadvantage compared to larger companies looking to buy housing stock to convert it into rental units.

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Broady said that it gives larger companies the opportunity to buy up stock outside the city, where vacancy rates are especially low.

"It's a trend that you are hearing about in other provinces," he said. "You are starting to see these large multinational corporations coming in and buying even single-family homes."

"This is a big concern in neighbourhoods where you're going to have tons of rental properties owned by big corporations making it more difficult for young families to come in to buy these properties," he said.