Paul Cardinal, an economist for the Quebec Federation of Real Estate Boards, stated that there are numerous first-time home buyers who are now priced out of the detached home market in many areas of Montreal.
Sales of homes in the region have been increasing for the last 15 consecutive quarters. The supply of homes is lower and the prices are reaching new records. Sales in the first quarter of 2018 were the highest in seven years.
Economist Paul Cardinal mentioned that second and third time home buyers are currently the most active right now on the market, particularly on the island.
He stated that first-time home buyers are forced to look at the very east or west part of Montreal otherwise they are forced to buy a condo instead of a single-family home. If they are looking to purchase a single-family home, they may have to search for one in the suburbs.
New mortgage rules introduced in recent months have also impacted first-time home buyers. These new rules have reduced how much buyers can borrow and how long they can amortize the loan.
Taking a look back, in 2008, buyers could buy an average single-family home in the Sud-Ouest area for $275,000 with a minimum down payment of $13,750. To qualify for the loan, the buyers would have to earn around $60,000 per year. In 2018, the same house would cost more than $600,000 with a down payment of approximately $36,000. To qualify for the loan, the buyers would have to make more than $100,000 per year.
Economist Paul Cardinal stated that first-time buyers can still get into the real estate market but as time goes by, it will be less and less likely that they will be able to afford a detached starter home on the island.
According to the economist, shortage of homes for sale determines prices. As shortage of homes increases, the higher the pressure on prices. Any available land on the island of Montreal will be for condos. Shortage of single-family homes will increase.