PORT­FO­LIO

The Peak (Hong Kong) - - Portfolio -

The prov­ince of Que­bec is an anom­aly in Canada: pre­dom­i­nantly French­s­peak­ing, gov­erned by a civil law sys­tem, and with a dis­tinctly dif­fer­ent his­tory of set­tle­ment than the rest of Canada. Its land mass is three times that of Thai­land, but most of its eight mil­lion habi­tants are tucked away in the south, nes­tled be­tween the prov­inces of On­tario and New Brunswick, with the US to the south.

Cos­mopoli­tan Mon­treal is known for its art and de­sign, joie de­vivre, and strong Euro­pean in­flu­ence. The is­land city and neigh­bour­ing suburbs host half of Que­bec's pop­u­la­tion, mak­ing it Canada's sec­ond most pop­u­lous ur­ban cen­tre. Both Toronto and New York City are within a six-hour drive, English is spo­ken nearly as much as French, and a fifth of the pop­u­la­tion is trilin­gual.

As hu­mid sum­mers be­gin, plant life ex­plodes where there's no con­crete. Mon­treal­ers ex­pose their skin and drink ar­ti­sanal beers on out­door pa­tios – bet­ter known lo­cally as ter­rasses. Af­ter short, cool au­tumns with no­to­ri­ous yel­low, or­ange, and red fo­liage, tem­per­a­tures plum­met for six months, the land qui­ets un­der snow, and the rhythms of Mon­treal keep pul­sat­ing in­doors.

Lo­cal pro­fes­sion­als with av­er­age in­comes can rea­son­ably ex­pect to se­cure a first home – mean­while the mar­ket is in­creas­ingly di­ver­si­fy­ing

ten­sions rose to a head in the 1990s when the pop­u­la­tion was asked in a ref­er­en­dum whether they wanted the prov­ince to sep­a­rate from the rest of Canada. While gains for both the prov­ince and Mon­treal have been slow in re­cent years, both sep­a­ratist fer­vour and mar­ket volatil­ity are at bay. Que­bec's real es­tate mar­kets weath­ered the sub­prime mort­gage cri­sis and re­ces­sion of 2008 and 2009, with over­all gains of 5 per cent each year, ac­cord­ing to the QFREB.

Other than a condo mar­ket favour­ing buy­ers, Mon­treal's real es­tate mar­ket is bal­anced. The Cana­dian Mort­gage and Hous­ing Cor­po­ra­tion (CMHC) projects the city's home val­ues will in­crease be­tween 1.7 per cent and 3.2 per cent this year.

The same Crown cor­po­ra­tion has be­gun as­sess­ing rates of for­eign own­er­ship of con­dos, and last year found that 1.3 per cent of con­dos in the Mon­treal re­gion were owned by for­eign­ers, com­pared to 5 per cent in down­town Mon­treal. More for­eign­ers, es­pe­cially main­land Chi­nese, are buy­ing homes in West­mount, a wealthy, tra­di­tion­ally English-speak­ing city ad­ja­cent to down­town Mon­treal. De­tached homes here usu­ally sell for well above C$1 mil­lion, and in­clude the of­ten-granted so­cial sta­tus of be­ing a West­mounter.

Over­seas in­vestors are also buy­ing con­dos and lux­ury town­houses on nearby Nun's Is­land, as well as con­dos in down­town Mon­treal.

YUL is a 38-storey two-tower down­town condo de­vel­op­ment with sig­nif­i­cant back­ing from

MORE FOR­EIGN­ERS, ES­PE­CIALLY MAIN­LAND CHI­NESE, ARE BUY­ING HOMES IN WEST­MOUNT, A WEALTHY, TRA­DI­TION­ALLY ENGLISH- SPEAK­ING CITY AD­JA­CENT TO DOWN­TOWN MON­TREAL

Plexes are two and three-storey build­ings with two to six units. Rows of plexes, street af­ter street, are ex­tremely com­mon in Mon­treal.

Ac­cord­ing to statis­tics from CMHC, the av­er­age sell­ing price of Mon­treal plexes with two to five units in­creased 16 per cent over the past five years. By com­par­i­son, condo prices in­creased 10 per cent in the same pe­riod.

Ho sells prop­er­ties in down­town, West­mount, the Plateau, and an­other high-end Mon­treal neigh­bour­hood called Outremont, and he says he warns his for­eign buy­ers to be care­ful.

“There's money to be made in Mon­treal, but in­vestors should do their homework be­fore they buy any­thing,” he says, ad­ding they should ex­pect to work hard for five to seven years to en­sure gains.

He ad­vises ab­sent own­ers to find a good prop­erty man­age­ment com­pany that will trou­bleshoot, serve tenants, and en­sure snow is re­moved. Even if a res­i­dence is empty, he says, prob­lems like leak­ing roofs or squat­ters are a risk.

Que­bec City, the prov­ince's cap­i­tal is a dis­tinctly dif­fer­ent mar­ket than Mon­treal. Its re­gional pop­u­la­tion of 806,000 is pri­mar­ily French speak­ing and less cul­tur­ally di­verse than Mon­treal. The av­er­age sale price in 2015 was C$265,000, ac­cord­ing to the QFREB, and the CHMA fore­casts dis­mal growth of -3.5 per cent to 1.8 per cent this year. “There's a lot of sup­ply right now in Que­bec City,” says CMHA an­a­lyst Fran­cis Cortellino.

Mean­while in Gatineau, a re­gion in western Que­bec across the Ot­tawa River from the On­tar­i­obased Cana­dian cap­i­tal, res­i­den­tial prop­erty val­ues are ex­pected to rise in 2016 be­tween 0.5 per cent and 2.5 per cent. The av­er­age res­i­den­tial price in the re­gion in 2015 was C$244,000. Its pop­u­la­tion of 331,000 is fore­cast to grow by 0.8 per cent.

For­eign condo own­er­ship in the Que­bec City and Gatineau re­gions is 0.6 per cent and 1.2 per cent re­spec­tively, as es­ti­mated by the CMHC in its 2015 study.

Que­bec real es­tate author Martin Provencher en­cour­ages his read­ers to in­vest hor­i­zon­tally – that is, to buy land, and not build­ings. He notes mu­nic­i­pal taxes are based on build­ings, not land, and un­like build­ings, the value of land doesn't de­pre­ci­ate over time.

“In Mon­treal, one square foot costs about C$250 and higher in the cen­tre of the city,” he ar­gues. “In the coun­try, a square foot costs around C$5 when you're 45 min­utes out of the city, and more than an hour out of the city, it can cost less than C$1.”

“Many for­eign in­vestors in­vest in Que­bec un­der­stand­ing that the land is the ba­sis of real es­tate,” Provencher says. “And there's no work to be done: it's an in­sur­ance pol­icy. If po­lit­i­cal ten­sions or pol­lu­tion be­come too un­bear­able where they live, the in­vestors will have a place to go.”

Car­di­nal of QFREB of­fers ad­vice for real es­tate in­vest­ment out­side of ur­ban cen­tres: “You have to find the next hot area.”

Zon­ing, pop­u­la­tion growth, high­way and tran­sit in­fra­struc­ture are all im­por­tant con­sid­er­a­tions, he says. Within two hours of Mon­treal, the Lau­ren­tians and Lanaudière re­gions have the high­est pop­u­la­tion growth in re­cent years, he says. “Log­i­cally, they should be good sec­tors.”

Cer­tain rules gov­ern for­eign prop­erty own­ers in Que­bec, in­clud­ing re­quir­ing a cer­tifi­cate from both pro­vin­cial and fed­eral gov­ern­ments stat­ing they do not owe back taxes in Canada when they want to sell. A no­tary has to with­hold 37 per cent of a prop­erty's sale price un­til those cer­tifi­cates are pro­duced. Also, to

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