Downtown condo sales slow due to lack of inventory

Downtown condo sales dropped markedly this quarter, but that doesn’t mean Montreal’s condo craze is over.

According to the latest new condo market overview released by Altus Group, in the first quarter of this year downtown Montreal experienced its worst new condo sales volume in the past two years, with 30 per cent fewer sales than the previous year.

But according to Altus Group real estate analyst Vincent Shirley, the lower sales aren’t due to a lack of demand. The issue is a lack of inventory. Despite all the projects under construction downtown, the pace of building simply isn’t keeping up with buyers’ needs.

While the pinch is most keenly felt in the central districts, in the greater Montreal area there has been a rapid drop in actual inventory over the past year. According to the Altus report, during the first quarter of 2019, builders added about 915 new condo units in the Montreal CMA, and 40 per cent of those are already sold. There are currently only about 1,700 condo units under construction in greater Montreal that have not been purchased yet, about 200 fewer units than the year before.

For buyers who aren’t willing to wait a year or more for a new condo, the pickings are even slimmer. The number of new condo units built that remain unsold has decreased by 56 per cent over one year, by Altus’ reckoning, from 722 units to 321.

Lack of selection and higher prices in the city are driving some buyers to look farther afield. Condo sales in Laval increased 12 per cent yearover-year, and nine per cent in the South Shore, while sales in Montreal ( but outside of downtown), and in the North Shore rose three per cent.

In the past couple of years, a number of supersized condo projects have launched with 300 or more units offered in a single phase. In the first quarter of 2019, however, there was a return to a more typical building size for Montreal; the top five largest projects ranged in size from just 77 to 128 units.

But with a number of megaprojects on the horizon in the next few quarters, Shirley predicted it won’t be long before downtown condo sales numbers climb again. Both Brivia’s 61-storey, 789-unit 1 Square Phillips tower and the first phase of Devimco’s 1,000-unit Maestria complex are set to launch this fall, he noted.

“Those guys with the mega projects will reach 60 to 70 per cent of sales at launch. Boom, next quarter will be a huge quarter,” he said. “You will have pentup demand, so when you release units in new projects, they will sell in record time.”

According to Shirley, just three years ago developers expected to sell no more than 20 to 30 per cent of units in a new condo project in the first quarter after launch. Now, new projects downtown can sell up to 70 per cent of the available units during that time, he said.

In the city, smaller, less-expensive units tend to go first, Shirley said, due to their appeal to investors. Rarer units with special features, such as large terraces or nice views, go next. While penthouses are often slower to sell, he said the units with the best views sell more quickly.