MONTREAL RISING
Canada’s second-largest city is experiencing an economic boom, but will it last?
Just four years ago, a Conference Board of Canada report asked: “Is Montreal a millstone or a driving force for the Quebec economy?” The answer was discouraging. The report concluded that Montreal’s “current performance is lagging, and the whole of Quebec is suffering as a result.”
Today, one of Canada’s bestkept secrets is that Montreal is booming. The malaise described in that 2014 report has lifted, replaced by an economic dynamism in Canada’s second-largest city.
The economy of Greater Montreal grew 3.5 per cent last year, the biggest increase since 2000. Job creation jumped 3.4 per cent in 2017, the largest increase in two decades.
Montreal is expected to be the only major Canadian city to make home-sales gains this year. Montreal also leads the country in luxury-home sales, with a 20-per-cent jump last year in the sale of properties valued at $1 million or more.
Among the factors driving the realty boom is a shortage of land for development on the island of Montreal, which is driving prices up. The island is one of the favourite Montreal districts for the increasing number of foreign buyers, targeted by taxes in B.C. and Ontario. Chinese buyers accounted for 16 per cent of Montreal property transactions last year, up from just 1.3 per cent a decade earlier.
“The market has been so stagnant and has been such a buyers’ market for so long that growth is natural,” Daniel Cholewa, CEO of real-estate broker network Keller Williams Urbain, told Bloomberg News.
Montreal’s real-estate buoyancy looks sustainable. Despite a 7-per-cent gain in sales last year, Montreal housing is still a relative bargain. The current median price of a detached house is $317,000, compared with Toronto’s $870,000 and Vancouver’s $1.4 million.
There’s more to the city’s economic renaissance than a robust real-estate sector.
Montreal received 53,000 immigrants last year, and can boast 35,000 international students attending the city’s abundance of universities (11). Newcomers are attracted by the city’s reasonable cost of living, about 28 per cent lower than that of Toronto and Vancouver, at an estimated $2,003 a month for a single young person’s basic needs of rental housing, food, telecommunications and entertainment.
And Quebec’s child-care expenses are the lowest in Canada, about $168 per month across all age groups. By comparison, the median monthly fee for Toronto preschooler spaces, the category with the greatest demand, is $1,212.
Those social-infrastructure factors help account for Montreal’s pool of more than 90,000 information and communications technology workers. Their presence has lured global tech employers to Montreal, including Google, Microsoft and Samsung. IBM and Amazon.com have opened new data and tech centres in the city.
In part because of its growing financial-technology sector (fintech), Montreal now ranks 14 as a global financial-services centre, closing in on Toronto’s Top 10 ranking, according to the Global Financial Centres Index.
Montreal’s burgeoning hightech startup sector also rivals its Toronto counterpart, with more than 50 small-biz tech incubators and accelerators. Montreal now leads Canada in venture capital (VC) available to launch those startups, with $727 million in VC financing of Montreal startups last year.
VC investments were up 64 per cent in 2017, making Montreal the Canadian capital of venture capital funding, according to consultancy PwC Canada.
Montreal now claims one of the world’s highest concentrations of artificial intelligence (AI) scientists. And, according to the 2018 Global Startup Ecosystem Report, the city leads the world in its pool of researchers working on “deep learning,” a subset of AI. Montreal’s status as a global AI hub was strengthened when Facebook and France’s Thales opened R&D centres in the city.
With about 10,000 videogame designers employed at 140 development studios in the city, Montreal ranks among the world’s five top video-game design centres. In addition to hosting operations of global industry leaders including Ubisoft, Electronic Arts and Edios, Montreal is also home to one of the world’s biggest concentration of “indie” game designers, with about 137 startups.
Montreal would be faring still better if not for continued shortcomings.
The city still levies Canada’s highest tax burden on business investment, according to a February report by the C.D. Howe Institute think tank.
Quebec’s high-school system is struggling, with the lowest graduation rates in Canada. Calls for apprenticeship programs and a more focused curriculum have gone unheeded by government.
And demographics and politics are conspiring to choke off Montreal’s economic revival.
The city is hobbled by a shortage of labour. Quebec’s birth rate of 1.7 children per woman is just slightly higher than the 1.6 per cent “replacement rate” required to keep the population from shrinking due to deaths and emigration. Aggravating the problem is an aging population moving into retirement.
And Quebec is not especially welcoming of immigrants. That the province accepted just 50,000 immigrants last year, while Montreal welcomed 53,000 newcomers, indicates that many of the city’s newcomers come from out of province, not abroad. Meanwhile, most of the increasing number of India’s computer-engineering émigrés who are taking a pass on the U.S. head straight for Toronto.
Quebec Premier Philippe Couillard supports higher immigration levels, but has dragged his feet on the politically sensitive issue. Meanwhile, the francophone nationalist party Coalition Avenir Québec is demanding a 20-percent cut in immigration. The mere existence of that interminable debate dissuades some of the world’s best and brightest from giving Montreal a chance.
Toronto’s high card in the race to master 21st-century technologies is its welcoming regard for newcomers from abroad. About half of Canada’s 300,000 arrivals from abroad make their new home in Toronto. Still more emigrate to that city after a few years elsewhere in Canada — including a Quebec whose French-English culture wars continue with sporadic anti-immigrant measures.
The Institut du Québec think tank has urged the province to raise its immigrant quota, noting that the current birth rate and immigration quota are “insufficient” to maintain, much less grow, its pool of skilled labour.
Quebec’s employer council, le Conseil du patronat du Québec, began sounding that same alarm a year ago. “Immigrants should be viewed as an opportunity, not a trap,” Yves-Thomas Dorval, head of the Conseil, told the CBC recently.
Should Quebec’s outdated but virulent “identity politics” over language curb the tremendous upside potential of Montreal’s economic and innovation renaissance, the 375-year-old city will revert to the malaise it has experienced since the nationalist Parti Québecois first came to power in 1976.
Bustling Toronto, Vancouver and Calgary will continue dominating the national conversation. A Montreal that has been sidelined by Quebec’s politics of race will return to flirting with irrelevance. And that, as Pierre Trudeau once said of the threat posed to Canada by ethnic nationalism, would be a “sin against humanity.”
The malaise has lifted, replaced by an economic dynamism in Canada’s second-largest city