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Montreal Real Estate Forecast: Should I Buy a Condo in 2018?

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Latest update: Should I Buy a Condo in 2019?

The condominium market has proven its popularity in Montreal’s real estate landscape, presenting attractive and affordable alternative homeownership options for young buyers. In fact, condos represented the highest volume in sales on Montreal Island in 2017. 8,517 units were sold on Centris this year compared to 5.728 detached homes and 3,066 ‘plexes.

With the new mortgage rules coming into force in January 2018, many first time buyers will need to shop at a lower budget. This could potentially eliminate single family homes and other larger buildings from their list of options.

Many of our clients have come to us over the past month with questions about the condo market. Most common are questions about the financial returns on condominiums. Are condos “safe” investments? What are the appreciation rates of condos compared to single family homes? Will buying a condominium as a rental property generate positive cash flow? We’ve teamed our market knowledge with Centris and CMHC data from the past 4 quarters, to provide as much insight into this topic as possible.

Here are some points to consider if you’re thinking of buying a condo in Montreal in 2018:

Millennials are driving the real estate market in Montreal

According to PWC’s report on Canadian real estate trends in 2018, the condo sector is poised for success with steady demand in most Canadian markets. PWC’s survey found that condo units appealed mainly to young professionals in the downtown core, who prioritize proximity to the business centre over square footage. In Montreal, survey respondents preferred city living, where they could benefit from new amenities, and a smaller commute time. Condos also appealed to the senior demographic, who found that new condominiums provided better accessibility. More than half of all industry professionals interviewed in Montreal recommended investing into the “age-restricted housing” sub-sector.

Top 10 Condos in Little Italy Under $400,000
Top 10 Condos in Little Italy Under $400,000

Appreciation rates of condominiums in Montreal

Condominiums tend to appreciate at a much slower rate than single-family homes do. This is primarily because condo ownership does not include ownership of the land, which is the biggest driver for appreciation.

In 2017, single family homes appreciated at an average rate of 7% across the island of Montreal, ‘plexes appreciated by 5%, and condos by 3%.

That being said, there are variances in the statistics based on location, and condominiums performed better in some neighbourhoods than others. For this reason, it’s important to consider micro-trends in specific boroughs as well as city averages.

For example, in Ville Mont Royale, the average condominiums appreciated at a rate of 9% over the 4 quarters of 2017, while single family homes only appreciated by 7%.

Meanwhile in Outremont, condos appreciated by 6% in 2017, while the values of single family homes depreciated by -5%. 

In 2017, the following neighbourhoods showed an above average appreciation of condos (above 3%):
Outremont (6%), Cote des Neiges / NDG (8%), Lasalle (4%), Ville Mont Royale (9%) Pierrefonds-Roxboro (5%), Pointe Claire (7%), Rosemont (6%), Saint Laurent (4%), Verdun/Nun’s Island (8%), Villeray (6%)

Resale value of condominiums in Montreal

When buying a condominium, like any other real estate investment, it’s important to ensure that you will be able to resell the property at a profit. Keep these tips in mind when it comes to your condo’s resale value:

  • Request a CMA to find out fair market value based on comparable sales, and to avoid overpaying for your unit.
  • Ensure that your condo is accessible – either by coming equipped with a garage or by being located close to a metro station.
  • Look for properties listed under market value, such as BMV properties or hot deals. 
  • Research the builder’s reputation and look an online reviews of other projects in the developer’s portfolio.
  • Inspect the condo association minutes to make sure the building’s funds are properly managed.
  • Never buy the most expensive condo in the building.
  • Always opt for a condo inspection before notarizing your purchase.

Buying a condo as a rental investment in Montreal

When buying a condo as a rental investment, there are two key points to look out for:

1. Properties that are listed below market value. 

Look for repossessed properties and properties listed below their municipal evaluation. Consider joining a mailing list for investors to receive handpicked deals in high-demand neighbourhoods.

More about BMV (Below Market Value) Properties here >>

2. Properties that offer positive cash flow, or as close to positive cash flow as possible. 

An investment brings ‘positive cash flow’ when the monthly income generated through rent is higher than the total carrying costs, including mortgage costs, bills, taxes, and other expenses.

Use our mortgage calculator to determine your carrying costs, while consulting with your broker about rental averages and vacancy rates, and our rental property ROI calculator to pull up a full report of each condo’s profitability.

Read more about how to calculate ROI on a rental investment here >>

When buying a rental property, it’s important to:

  • Invest in neighbourhoods where tenants are easy to come by. If your rental caters to students or tourists, stay close to the Downtown Montreal or the Plateau. If you are planning to cater to professionals, buy near the business centre or Old Port. If you plan to rent your property out long term to families, start your search in kid-friendly area such as Verdun, NDG or Mont Royale.
  • Stage your fully furnished rental according to mass market preferences, to secure the best profit margins and occupancy rates.
  • Check the co-ownership rules surrounding short and long term rentals
  • Work with an experienced broker with good knowledge about the investment market as well as the rental market.

The Pros of buying a condominium in Montreal

1. Location and lifestyle

Condominiums are usually built in popular and thriving areas; up-and-coming neighbourhoods, business districts, Downtown cores or around major universities. The research that condo developers put into choosing a “safe” spot – one that be easy to market once the project is built- will eventually benefit the buyers when and if they decide to rent out or re-sell their units. Living in the city may not appeal to all, but it presents several major advantages such as proximity to work or school, access to amenities, cultural events, and recreational activities.

2. Affordable Price

In many real estate markets, price might be a deciding factor in purchasing a condominium over other types of real estate. For example in Montreal, buyers with a budget of $300,000 would have many suitable 2 bedroom condos to choose from, but would be hard-pressed to find a decent single family home at that price point.

3. Low Maintenance

Condominium maintenance is managed through a condo association, and so individual owners are not directly responsible for performing maintenance on the building, common areas or grounds. This is a major perk for many buyers, since it frees up time for other pursuits, and implies a stress-free approach to homeownership. Unlike single family house owners, condo owners will never have to cough up $20,000 at once for a new roof, or $10,000 for new floors. Instead, smaller payments are put aside each month towards the condo’s maintenance fund, which collectively covers wear-and-tear as well as unexpected damages.

Montreal Real Estate Forecast: Should I Buy a Condo in 2018?

Cons of buying a condominium in Montreal

1. Higher Monthly Fees

As you might imagine, a pool, fitness centre, security system, and maintenance crew will all cost you money. Buyers of condominiums essentially become business partners in a residential community, paying monthly fees towards the upkeep of the property as well as to a security fund against potential damages. When shopping for a condo, be sure look into two things: how much condo association fees cost per month, and how the funds have been managed in the past three years. If having a pool, elevator or rooftop terrace in your building is not essential to you, you can look for buildings with fewer amenities and lower condo fees.

2. Association Rules

While a single family home affords you the freedom of doing as you wish within your own four walls, condominium ownership has stricter regulations to protect the overall stability and wellbeing of the entire residential community. Before signing on the dotted line, have a look through the association rules to determine whether they match your needs and lifestyle. Do you have a dog? Some condo projects have limitations on pets. Are you planning on travelling? Check that there are no rules against short term sub-leasing.

3. Lack of Privacy

Buying into a condo project means buying into the community as well. You’ll have neighbours on the other side of your walls, and will probably encounter them in the elevators or grounds at all hours of day and night. While some buyers may see this is an opportunity to make new friends and network, others may prefer the peace and quiet of a fenced-in yard.

Overall, whether you are suited for condo homeownership depends a lot on your lifestyle and financial goals.

Montreal Real Estate Forecast: Should I Buy a Condo in 2018?

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