Evaluating Montreal's Real Estate "Boom" Compared to Toronto's

28 November 2018
Joshua Chisvin

Montreal real estate is the hottest in Canada when it comes to price increases. I repeat: Montreal real estate is the hottest in Canada when it comes to price increases.

As a result, by following in Toronto and Vancouver’s footsteps, speculation exists the city will be the next Canadian bubble.

If you look at the long-term trend, this is pretty normal. During the Great Recession, Montreal real estate peaked after Toronto and Vancouver began tapering.

Despite this, Montreal has a long way to go to give investors the same kinds of returns. For one, Montreal real estate is significantly cheaper, with prices that are significantly lower than Toronto or Vancouver.

As of last October, the price of a typical home in Montreal was $350,000. The price of a typical home in Toronto? $766,300, which is about 118% higher than it is in Montreal.

And in Vancouver, the price of a typical home is $1,062,100 — over 203% higher than Montreal.

For the sake of context, Montreal has more density than Toronto, but less than Vancouver. Also, Montreal real estate prices don’t grow very fast.

In fact, the price of a typical home in Montreal is 6.29% higher than the same time last year. For the sake of contract again, Toronto is only 2.64% higher than last year. Vancouver is at just 1.03%.

Montreal is growing at twice the pace of Toronto, as well as six times Vancouver. That’s wild!

However, Montreal has lagged Toronto and Vancouver significantly over the past few years.

Montreal’s most recent peak growth was in June 2010, when the annual growth rate hit 8.89%. Toronto’s peak was 31.43% in April of 2017. Vancouver reached an even higher 32.61% peak annual growth, reached in July 2016.

Montreal might be higher today, but it’s trailing recent peaks, and by quite a bit.

Montreal real estate also trails Toronto and Vancouver over the long-term. Montreal prices have gained 41.19% over the past 10 years. Meanwhile, Vancouver is up 96.98% and Toronto is up 113.34% during the same period.

In order for prices to catch up, Montreal prices would need to double from here. That assumes flat prices in Toronto and Vancouver.

The critical point? Montreal real estate prices are cheaper and grow slower than Toronto and Vancouver. They also underperform, by comparison.

Moreover, Montreal is home to some of the cheapest real estate in the whole country, despite being a large city. And the faster than normal growth observed now is more likely a game of catch-up, rather than a new bubble market.

SOURCE: Better Dwelling

  Real Estate