With the upswing of condo construction in Montreal’s Downtown core and Griffintown, there has been much debate among buyers over whether it’s a financially sound move to buy a condo in a saturated real estate market. While some argue against the resale and rental competition that such a market entails, others are in favour of the low prices and leverage afforded to buyers and investors. Here are a few points to consider when deciding whether to buy a condo Montreal in 2017:Is it a good time to buy a condo in Montreal?
Montreal is currently a buyer’s market
When there is a surplus of properties for sale in a particular city or in a particular housing sector, it’s referred to as a “buyer’s market.” A buyer’s market occurs when there are more homes for sale than there are buyers looking to purchase them. This works to the advantage of most buyers, because properties tend to stay on the market for a longer time, and prices will drop as sellers try to undercut the competition. Buyers also have more bargaining power in a buyer’s market since bidding wars are a rare occurence. When the cycle turns towards a seller’s market several buyers will compete for fewer properties, causing prices to rise again.
This is not to say that every condo for sale in a buyer’s market will be a good deal. Buyers should still work with a real estate professional to calculate the property’s fair market value before putting in an offer to purchase. However, the saturated market conditions will offer more opportunities and leverage for buyers and investors looking to capitalize on homes listed below market value.
The condo segment is poised for growth
Montreal’s latest real estate trends indicate growth in both sales and property prices within the condo segment. In February of this year condominium sales increased by 11% compared to the same month last year. Prices also rose by 5%, reaching an average of $238,999 in the GMA. Montreal as a city also shows overall signs of economic growth, with a 1.6% growth in its GDP in 2017 and a 6.2% unemployment rate- its lowest since Statistic Canada began publishing the figure in 1976.
Advantages of buying a condo
The benefit of buying a condo vis-a-vis a single family home or a revenue property is that condos are an easy, low-maintenance homeownership option. If you don’t want the hassle and responsibility of doing work on your land and on the structure of your property, a condo may be the most convenient solution. While you’ll still be expected to handle repairs within your unit (such as your appliances, floors, and lights), larger issues with the building and common spaces will be taken care of by the condo association manager. Your condo fees paid each month will contribute to the reserve fund for such issues, and will also help finance daily and monthly maintenance of the building and its shared amenities. Since repair costs are shared among the many homeowners in a condo project, a condo owner will never be confronted with a huge renovation expense the way a single family home owner would. Lastly, condos allow for affordable homeownership within close distance to the Downtown core.
Disadvantages of buying a condo
While you might benefit from the central location, as a condo owner you’ll be compromising on square footage. If you have kids or large pets, you might find a condominium simply too small for your needs. Condos also have stricter rules regarding the use of shared spaces such as the courtyards and rooftop terraces, so chances are you won’t be able to customize the outdoor areas to your liking. And while a condo may cost less upfront, you’ll have to also take into consideration the monthly condo fees which are subject to change if there are any major issues with the building. For this reason, it’s always best to do thorough research into the condo’s management history and the reputation of the builder, before you put in your offer.
For most buyers, their budget will determine whether they can consider purchasing a larger property type. As of June 2017, here are the starting and average costs for various property types (2+ bedrooms) listed for sale on Centris, in a selection of neighbourhoods:
Downtown and Old Montreal:
- Cheapest condo: $199,000 | Median price: $415,000
- Cheapest single family homes / bungalow: $324,900 | Median price: $760,000
- Cheapest duplexes: $339,900 | Median price: $500,000
South West Montreal
- Cheapest condo: $179,000 | Median price: $352,461
- Cheapest single family home: $274,000 | Median price: $292,500
- Cheapest duplexes: $299,000 | Median price: $433,500
Rosemont and Little Italy
- Cheapest condo: $175,000 | Median price: $334,250
- Cheapest single family home: $289,000 | Median price: $380,000
- Cheapest duplexes: $375,000 | Median price: $531,750
- Cheapest condo: $199,900 | Median price: $355,000
- Cheapest single family home: $695,000 | Median price: $536,000
- Cheapest duplexes: $460,000 | Median price: $662,500
Other Considerations – Are you ready to buy at all?
Before buying any time of property, we would advise looking into a comparison between buying and renting. To safely make the jump from a renting lifestyle to homeownership, you need to make sure that you qualify under these three criteria:
- You’re ready to settle down for at least 4-5 years, and/or you’d be comfortable with becoming a landlord if you decide to travel. Because of the costs involved in the acquisition and sale of a property, buying a condo is not likely to save you any money (when compared to renting) if you resell it within 4 years.
- You have a mortgage pre-approval. A mortgage pre-approval lets you know how much you’d receive from a bank as a loan for buying a house. Typically a lender will look at your debt to income ratio (how much you’re earning and how much you already owe in car loans, credit card loans, student loans etc) to determine the risk involved in lending money to you. Applying for a pre-approval should always be your first step towards homeownership, since it’ll indicate whether you qualify for a loan, and if so, what your budget and mortgage rate will be.
- You have stable income and comfortable savings. If homeownership will cause stress in your personal finances, it’s always better to keep renting until you have more stability. As a general rule of thumb, your total monthly housing costs (including mortgage payments, property taxes and heating expenses) should amount to no more than 32% of your gross household monthly income. In addition, your total monthly debt load (meaning your housing costs plus any car loans, credit card payments, personal loans, line of credit payments or other debts) shouldn’t exceed 40% of your monthly income. You can use our mortgage calculator to find the monthly mortgage costs on any property price-point. Next, check that you have enough saved up for the closing costs and the hidden costs involved in a purchase. If you don’t, you can use the 50-20-30 rule to save up as much as possible while you prepare for homeownership. Is it a good time to buy a condo in Montreal?