Debate over foreign buyers reaches Montreal

Realtors in Montreal said Tuesday sales of existing homes reached record levels last month, as concerns continue to grow that foreign buyers may be eyeing the city as an alternative to jurisdictions like Greater Vancouver and southern Ontario where they face a special tax.

The Greater Montreal Real Estate Board said there were 5,057 residential sales in May, a 15 per cent increase from a year ago and the best May ever — topping a peak hit in 2007. The median price of a single family home jumped six per cent from a year ago to $319,000.

“Non-resident buyers have been a growing factor in Montreal for some time,” said Doug Porter, chief economist with Bank of Montreal. “It hasn’t been obvious since the inflows are not as significant as in Vancouver or Toronto, and the underlying market simply isn’t nearly as tight as in those other two cities, so prices have remained well contained.”

The leader of Projet Montreal, the city’s main municipal opposition party, has said she’s worried there will be a rush of outside buyers into the marketplace. Valerie Plante plans to fight the next municipal election on getting power from the province to impose a tax.

Carlos Leitao, the Quebec finance minister, said his department was monitoring whether the Ontario tax will have a spillover effect on the Montreal market.

The tax, along with 15 other measures to cool the market in southern Ontario, may already be having an effect. The Toronto Real Estate Board reported Monday that May sales were off 20.3 per cent from a year ago in the Greater Toronto Area while average prices dipped 6.2 per cent from April.

The QFREB published an economic analysis at the end of last month and noted the Canada Mortgage and Housing Corp. proportion of foreign buyers in Montreal was estimated at only 1.5 per cent.

Meanwhile, a Montreal think-tank says it’s time for B.C. and Ontario to reverse decisions on a foreign buyer tax on residential properties.

“While it’s arguable that foreign buying has had an impact on prices in the Vancouver area, the evidence is far less conclusive in Toronto,” wrote Mathieu Bédard, an economist with the Montreal Economic Institute, in a research paper published Tuesday. “A tax on foreign buyers is not a solution to our bad public policies.”