Quebec on top for affordability

Daniel Smyth

May, 2011

The years between 2000 and 2010 mark the most dramatic increase in the median price of single family dwellings in Quebec compared to the 1980s and 1990s.

The median price of homes in Quebec increased by 122 per cent, but in cities, prices increased by 159 per cent (Quebec City), 133 per cent (Montreal) and 131 per cent (Gatineau). Increases were somewhat less inSherbrooke, 117 per cent; Saguenay, 111 per cent; Trois Rivières, 96 per cent; Shawinigan, 74 per cent; and Baie-Comeau, 40 per cent.

To compare decades in Quebec, one must utilize the average sale price. For example, in the 1980s, prices increased by 107 per cent and during the 1990s, prices grew by only 10 per cent. It is interesting to see that inflation was highest in the 1980s at 77 per cent, but considerably less (21 per cent) in the 1990s. Inflation and average price are obviously related.

Affordability is based on property prices, income and interest rates.

According to the Desjardins affordability index, a home in 2010 is only slightly less affordable than in 2000. However, a home was more affordable in 2010 than 20 years ago.

The average price increase between 2000 and 2010 was 123 per cent but in this decade it has been more common for families to have two incomes, the demographics increased and interest rates remained relatively low compared to previous decades. Inflation in this decade, at 21 per cent, was offset by these factors. Market conditions remained tighter and favoured the seller more than the buyer, thus supporting higher average price increases.

The increase in the average sale price of a single family dwelling in provinces like Alberta (140 per cent), Saskatchewan (160 per cent) and Manitoba (153 per cent) has left Quebec far behind. But at the same time, property values in Quebec have been able to catch up, as it were, to those in Ontario (86 per cent). Overall, Quebec remains one of the most affordable provinces in Canada.

Of interest is that the single family dwelling is becoming less important in the total Montreal market. Going back to the year 2000, homes represented about 43 per cent of the total number of sales transactions in Montreal. By the year 2010, this proportion reduced to 31 per cent.

Condominiums in 2010 represented the largest percentage of total sale transactions in Montreal, comprising 45 per cent of the market. The plex market has changed little. In 2000, plex sales represented 27 per cent of the market, but in 2010, plex sales reduced to 23 per cent of the market.

First-quarter results for 2011 are in, and even more change has taken place. Condos, single-family dwellings and plexes represented 52 per cent, 24 per cent and 23 per cent, respectively, of the total sale transactions. They show an expected outcome toward a dominant Montreal condo market.

In part, this demand is based on first-time buyers and boomers or their children, who have downsized already or looking to downsize in the next while. First time buyers do not have the equity or cash to afford single-family dwellings to the same extent that they do for condos; an attractive first property would naturally be a condo. The average sale price of a single-family dwelling in Montreal in 2010 was $426,173 vs. a condo at $283,970.

A minimum down payment on the condo ($14,198) is about two-thirds of a single-family dwelling ($21,309). Considering a monthly budget, a condo makes more sense vs. a home. The monthly payment for the condo ($1,458 per month) would be approximately 50 per cent less than the home ($2,188 per month).

As children leave and a large house becomes more work, convenience and peace of mind are more desirable. This situation has also increased the demand for condos.