Montreal prices post biggest dip in 50 years

COVID-19 CRISIS

MONTREAL • Residential property prices in the greater Montreal area could post their biggest drop in at least half a century if business activity takes longer than six months to restart in the ongoing COVID-19 crisis, a new forecast shows.

Sustained job losses and reduced consumer confidence stemming from a prolonged coronavirus lockdown could trigger a 3.5-percent decrease in aggregate home prices for Montreal by the end of 2020, Royal LePage said Tuesday.

The forecast is predicated on Quebec’s economy remaining idle until the third quarter, said Dominic StPierre, the real estate company’s top Quebec executive.

Assuming activity begins to return to normal by late spring, prices in greater Montreal would still fall 0.5 per cent year-over-year by the end of 2020, Royal LePage said.

Royal LePage has never recorded a single annual drop of as much as 3.5 per cent in 50 years of tracking real estate data, St-Pierre said. Annual price declines during the recessions of the early 1980s and 1990s fell shy of 2 per cent, he said.

“Even during the financial crisis of 2008, things never got this bad,” St-Pierre said Tuesday. “It’s a health crisis that means we cannot proceed with transactions. As soon as sales resume, there will be strong demand for property. People still need a place to live.”

Royal LePage’s aggregate home price includes a weighted average of all property types. A 3.5-per-cent dip would cut the aggregate price of a Montreal-area home to $421,400 by the end of 2020, while a decline of 0.5 per cent would push it to $434,500, the data show.

Property sales and new listings in Montreal and elsewhere have shrunk since mid-March, when Premier François Legault ordered all non-essential businesses in Quebec to stop operating as a result of the pandemic.

The drop in activity over the past month has been staggering. Property transactions on the Island of Montreal plunged about 50 per cent during the week of March 29 compared with the same period in 2019.

While the province has begun loosening restrictions, most non-essential businesses in Quebec are closed until May 4, and real estate agencies have stopped in-person property showings. As of now, Quebec is the only Canadian province to exclude real estate brokerage from the list of essential services.

Would-be homebuyers can look forward to better market conditions toward the end of 2020, according to St-Pierre. Foreign buyers are unlikely to be around in large numbers, while speculators — including those who were acquiring real estate for short-term rentals — will probably play a smaller role, he said.

“This is going to give the market some oxygen,” StPierre said. “Until the pandemic began, conditions were extremely tight.”

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