Record-breaking sales numbers. Bidding wars. A growing number of buyers from China. As a lifelong Vancouverite who left for Montreal two years ago, it all leaves me with a feeling of déjà vu.
In Vancouver, the boom began with bidding wars in tony neighbourhoods with million-dollar mansions, but the impact eventually rippled throughout the metropolitan area.
Today you are lucky to find a million-dollar teardown in Vancouver.
Between 2005 and 2017 in Vancouver, house prices increased more than 173 per cent. In Montreal today, the median price of a detached home on the island is just under half a million dollars. In Vancouver, it’s almost $3 million. Yet the median family income is similar in both cities. In Vancouver, it’s just under $80,000, compared with $77,000 here in Montreal.
But Montreal is not Vancouver, or Toronto, for that matter. Most analysts I spoke to say they don’t believe house prices will climb quite as high here. We are not locked on a finite piece of land like Vancouver is. We don’t have as many high-paying corporate jobs as Toronto does.
And the biggest lid on speculation might be the thing Montrealers hate even more than a seemingly endless winter: bureaucracy.
According to immigration lawyer and policy analyst Richard Kurland, the biggest reason Montreal has been overlooked by foreign property investors so far is taxation and regulation.
While B.C. regulators seemed to turn a blind eye to speculators exploiting the system, Quebec has shown the muscle to crack down on shady dealings through its own provincial tax collection system, Kurland said.
But now governments in B.C. and Ontario are imposing new taxes on foreign buyers and beginning to enforce existing regulations on property ownership to ensure these buyers pay their fair share of taxes. As a result, Montreal is looking more attractive, he said.
“I expect to see Vancouver investments slide sideways, but that money’s got to go somewhere,” said Kurland. “It makes it more logical to consider other destinations like Montreal.”
Kurland, a former Montrealer now based in Vancouver, has advised the federal government on immigration issues since the 1990s. He said it is all but inevitable that Montreal will see increasing interest from Chinese buyers, thanks to an exponential increase in millionaires in China, and a commitment to immigration that all but guarantees a flow of up to 2,000 new millionaires per year arriving in Quebec from overseas.
Under Quebec’s investor program, immigrants with more than $1.6 million in net assets can settle in Quebec if they agree to invest a minimum of $800,000 over a five-year term. Between May 2017 and February 2018, the province planned to accept up to 1,900 applications through this program, with as many as 1,330 to come from China, Hong Kong and Macau.
“The number of millionaires who want to escape Chinese pollution is so big that they are willing to pay big bucks to access Canadian status,” Kurland said. “They are not bad people, and their source of funds is legitimate. They just want a better life for their kids.”
Now that Quebec has tightened up regulations to prevent millionaires from coming here and rapidly trampolining to Vancouver or Toronto, Kurland said the wealthy immigrants who land here are even more likely to invest in high-end residential property.
“It doesn’t matter to them if they pay $1.7 million or $2.3 million for a home,” Kurland said. “Folks from Hong Kong see the prices here as a joke. It’s so much cheaper here.”
According to Kurland, accepting 1,000 millionaires a year into Quebec from China barely makes a dent in the millionaire supply, because there are many, many more families in the queue waiting for their applications to be reviewed.
“There’s a supply of buyers — millionaire buyers — lined up,” Kurland said. “It’s the golden heart of the demand for Montreal property.”
With a limited supply of housing here for those used to millionaire lifestyles, Montrealers can expect the price of luxury real estate will likely go up, Kurland said.
And indeed, the hot streak in Montreal real estate has, by all accounts, been fuelled by sales of luxury homes.
In 2017, on the island of Montreal, 1,338 single-family homes were sold with a list price between $700,000 and $5 million. While overall sales rose eight per cent over the previous year, Centris data reveals that sales spiked by 19 per cent for homes between $500,000 and $700,000 and by 30 per cent in homes listed over $700,000.
Analysts at Statistics Canada, the Canadian Mortgage and Housing Corporation and the Quebec Federation of Real Estate Boards have all been working in recent months to quantify just how many non-resident buyers from other countries are investing in Canadian real estate.
In most Canadian cities, they found the number of transactions involving buyers with a home address in another country is less than one per cent, with a high of almost five per cent in Vancouver, three per cent in Toronto and less than two per cent in Montreal.
The numbers might seem small, but it is a mistake to say the impact is insignificant.