Property sales, prices down and listings up in Quebec before interest rate hike

Real estate brokers in Quebec are expecting "For Sale" signs to increase on lawns across the province after this week's key interest rate hike.

The increase to 5 per cent is the 10th increase since March 2022, and it is now the highest it's been since 2001.

"Definitely those that purchased at the top of their budget on a variable rate mortgage, they're really going to be feeling the pinch now," said Royal LePage Broker Sean Broady.

If Broady is correct, the second quarter numbers showing increased listings and decreased sales from the Quebec Professional Association of Real Estate Brokers (QPAREB) may continue.

From April to June, the association reported a 15 per cent reduction in sales in the Montreal area and a 44 per cent increase in listings. The median price of all property categories in the metropolis also dropped to between 4 and 5 per cent, depending on the property.

The average sell time in days also increased to 23 for single-family units, 22 for condos and 32 for plexes.

Across Quebec, the average selling time was 52 days for single-family homes, up 17 from 2022, and 54 days for condos, up 19 days. Sales are down 13 per cent and listings are up 26 per cent in the province, and median prices have decreased 3-4 per cent for single-family and condo units, but plexes are up two per cent.

Montreal (-17 per cent) and Gatineau (-15) saw the greatest decline in sales in Quebec, followed by Sherbrooke (-13), Drummondville (-11) and Quebec City (-7).

The association says, however, that the market remains a sellers' one, particularly in markets where prices are pushing out first-time homebuyers.

There was a less pronounced decline in sales in 2023's second quarter.

"In a seasonal context conducive to purchasing a home, buyers have indeed returned in greater numbers, encouraged by the stabilization of interest rates and property prices, all as negotiation conditions continue to normalize," said QPAREB market analysis director Charles Brant. "Although it is too early to speak of a general market recovery, this lessening of the drop in sales at least portends a stabilization of sales for the next few months, including for markets with some of the highest property prices in the province."

The median price for a single-family home across Quebec was $430,000 (-4 per cent) in the second quarter from the same period in 2022, but up 8 per cent from the first quarter of 2023. Condo prices were similar.

Brant said there is still a "chronic lack of inventory of properties for sale" across most of Quebec's markets and that demand remains high.

Broady expects some buyers will hold off due to the latest interest rate hike, but first-time buyers are still trying to enter the market.

"There are a lot of buyers out there who have lowered their purchasing expectations," he said. "They've lowered their budget a bit, [but] they're still out shopping."

RATE HIKE NECESSARY

The central bank says the interest rate hike was necessary to help slow economic growth and reduce inflation.

"We are trying to balance the risks of under and over-tightening monetary policy," said Bank of Canada governor Tiff Macklem. "If we don't do enough now, we will likely have to do more later. But if we do too much, we risk making economic conditions unnecessarily painful for everybody."

The interest rate hike could hurt those homeowners needing to re-negotiate their mortgages.

"If you don't qualify to switch financial institutions because of the high-interest rates, you are at the mercy of that specific bank, so then they can charge you whatever they feel like they can charge you," said North East Real Estate and Mortgage Agency president Terry Kilakos.

The bank's next rate decision will be made on Sept. 6.