Quebec's housing market is coming out of the doldrums

Quebec's three main housing markets, Montreal, Quebec City and Gatineau, are seeing similar trends at somewhat different intensities.

This can be characterized as a housing shortage caused by immigration, inflation and labor costs, and a market that will recover somewhat by 2024. But don't expect prices to drop.

In Gatineau, a municipality that covers five boroughs across the river from Ottawa, rental vacancies of 1.1 per cent have been at a historic low, though “steady” since 2018, CMHC said in its January rental market report.

The average two-bedroom custom-built apartment went for $1,252 last year, up 8.9 percent.

In Montreal, vacancies fared slightly better by 1.5 per cent, while the average price rose 7.9 per cent to $1,096. Quebec City worsened with 0.9 vacancies, but with cheaper units at $1,040, up 4.8 percent.

Housing starts started slowly last year, slowing from 2022, but improved significantly in December, Desjardins said in the report.

In fact, total starts were flat in 2016, with just 38,912 built. While rental starts outpaced other new construction, they were the lowest for all sectors, with 9,000 fewer built. But the province has more than 60 percent new leases in the country, compared to less than 40 percent elsewhere.

Although home prices have stabilized since 2022, limited inventory resulted in the median home price reaching $507,740 in January. However, the median price of a newly built home rose above $870,000 in December.

All regions, even remote regions, are experiencing a crisis, and if there is a crisis, it is a problem of access.

“What we're seeing is that even in the Gaspé (Gaspe Peninsula) in the far east, there's a housing shortage in many places, meaning that affordability is going down two to three percent very quickly,” Gabriel says. Giger, a public policy analyst at the Montreal Economic Institute. “Even Rimouski, if I'm not mistaken, is below one percent. So what we see now is that housing needs to be built across the province.”

According to Giger, the new home market has been stagnant for too long.

“And in 2024, it's not going well. In the first two months, compared to 2023, we reached minus nine percent in the start of housing construction.”

Desjardins predicts that starts will “gradually pick up” this year based on lower interest rates, but will not return to the 2021 peak.

Hiring labor to build houses may also be more difficult, according to a survey of members by the Commission de la Construction du Québec. This should reduce labor cost pressures and stimulate construction activity.

Giger said housing starts could be accelerated if the market had more imagination. Too many cities, planners and developers are still indifferent to traditional housing. New developments can be hindered by arcane zoning laws and red tape.

“You don't have many municipalities that allow four units,” he says. “Municipalities should feel the need to increase this density. There are many classic views of a single house, a private family. So that might be something going forward, but right now you don't have a political sense that it's changing.”

Giger offered a mix of housing styles, not just single-family, but townhouses, duplexes, and triplexes. This can fill the “missing middle” between single and multi-story families.

“A townhouse is bigger than an apartment, so people who live in the suburbs might want to live in a townhouse,” he said.

Stephanie Lapierre, chief economist of the Quebec Professional Association of Real Estate Brokers, said there is an inherent contradiction in the housing market between the province's regions.

Prices in Montreal are high.

“But we also see that in affordable markets like the Quebec region, prices are low, but inventory is so low that it can be difficult to find a property that fits your needs.”

Several cities have introduced property tax credits to speed up construction, Desjardins said.

The provincial government has proposed reforms to the construction industry to “make it easier for employers to place workers where they need them.”

Avi Friedman, an architect and home design professor at McGill University, says there has been less government intervention in the market in recent years.

“With government intervention, housing has been left to the private sector and we are now suffering the consequences.”

But one thing he has noticed is that single-family homes are declining in popularity.

“You're going to see a lot of six to 12 stories. So there's a shift here.”

And then there are a few blockbuster events that change the face of a city like Montreal.

One of them is Carbonleo, developer of the $7 billion Royalmount “eco-community” with more than 3,000 “top” units on the 43ha former Blue Bonnets racecourse.

Then there's Vision Bridge-Bonaventure Consortium's recent proposal for 9,500 residential units – 20% affordable – for the city's Peel Basin near downtown, which covers an area as large as eight football fields.