Real estate brokers help first-time buyers better navigate Montreal’s booming housing market
No one is predicting that the Montreal real estate market will reach the stratospheric heights of Vancouver or Toronto, but with the continuing trend towards higher prices and rising interest rates, first-time home buyers who are thinking of purchasing a property this year and who are in a good position to do so, should consider taking action.
“2018 is the year where it’s important to make the move and purchase a house, because if people continue to wait, prices will just continue to increase,” said Daniel Dagenais, a Realtor in PointeClaire who also sits on the Greater Montreal Real Estate Board’s board of directors.
Dagenais pointed at recent statistics to show how much house prices have risen in recent years.
“In 2000, the average price for a residential property in Montreal, which includes condos and single-family dwellings, was only $124,000. In 2007, it was $244,000, so it almost doubled in seven years. In 2012, it was $316,000 and last year it was $365,000,” he said.
Not only do higher property prices add to the urgency for first-time buyers to enter the market soon, but so do tightened mortgage lending rules and rising interest rates which had been relatively unchanged for many years.
“In the last eight months, we have seen three increases in the interest rate,” observed Dagenais. “The financial market believes that there will probably be other increases in the coming months and years. It’s much easier to purchase now to lock in at an interest rate in the area of three per cent per year for a five-year fixed term than having to wait when it could be at four per cent or higher.”
While a first-time buyer might consider shopping for a house on their own by browsing advertisements from property developers or looking through open house listings, Dagenais said that people are better off hiring a real estate broker to help them find the right property at a price they can afford. He added that in a very active market, selling times tend to decrease and working with a broker ensures that they don’t miss out on the right property when it comes on the market. He also noted that real estate brokers help their clients in assessing their needs. A broker will propose the type of property that best suits their client’s lifestyle and will sometimes even recommend exploring a new neighbourhood that the buyer has not considered.
“In greater Montreal, we have over 9,000 Realtors that can help to find the best buyer for a property. This represents a vast collaboration network that benefits both buyers and sellers,” he said.
Dagenais pointed out that licensed real estate brokers have access to the Centris system which is the largest database of properties for sale or for rent in quebec. It currently has about 90,000 listings across the province and agents can quickly narrow the search for their clients to find properties they can afford in the neighbourhoods where they want to live.
For many young buyers, the lower price point of condominiums is attractive, but Dagenais warns that not all of them are good investments and that working with a broker will help a buyer make the right choice. “Buying a condo can be a complex adventure. A broker has the skills and experience to analyze documents such as financial statements and to recommend whether it is a good option or not.”
For many first-time buyers, finding the money for the necessary down payment is difficult. Dagenais reminds them that the Home Buyers’ Plan has helped thousands of Canadians buy their first home by allowing them to borrow as much as $25,000 from their Registered Retirement Savings Plans (RRSP). One strategy, he noted, was to invest money in an RRSP by the end of February which can then trigger a tax refund that year which gives a buyer even more money for a down payment.
Dagenais also reminds people who are investing in a home for the first time that a good chunk of the money they pay to the bank each month ends up building equity for them.
“I like to show them that on a mortgage, more than half of the monthly payment is actually a capital reimbursement so if you have a $1,000 payment each month, more than $500 goes back to reimbursing your loan so your real expense is only $500 in interest,” he said. “Furthermore, many buyers will be happy when they sell their property, as the capital gain is not taxable,” he added. “When we combine the leveraging effect with the tax free gains and the benefit of living in your own place, it has a strong impact on your quality of life so it’s a winning combination.”