Real estate: return of buyers and possible price surge for 2025

After a strong end to the year, Quebec’s real estate industry expects that 2025 will maintain its accelerated level of activity of recent months, and that price growth will intensify even more.

In December alone, the number of residential transactions increased by 52% compared to the same month of the previous year. An explosion that economists mainly associate with the five successive corrections of the key rate over the last seven months.

“The first buyers came to increase activity during the fall, taking advantage of the drop in rates and a higher number of listings,” explains Charles Brant, director, market analysis, of the Professional Association of Brokers real estate of Quebec (APCIQ).

With the possibility that 2025 will offer even more advantageous financing conditions, such as further rate cuts by the Bank of Canada and the application of new incentives (amortization over 30 years), the latter expects that next year be at least as busy as 2024.

Forced sales

The deputy chief economist of the Canada Mortgage and Housing Corporation (CMHC) thinks no less. Tania Bourassa-Ochoa recalls that the renewal in 2025 of no less than 1.2 million fixed-rate mortgage loans could also contribute to inflating the statistics.

As 85% of these borrowers took out their mortgage when the Bank of Canada’s prime rate was equal to or lower than 1%, she fears that renewals at much higher interest rates will force many of them to reconsider. their lifestyle.

Without the situation being dramatic yet, Quebec-based JLR, a subsidiary of Equifax, noted that Quebec has already recorded a significant increase in the number of bad debts over the past twelve months. In fact, exercise notices increased by 19%, abandonments by 21% and legal hypothecs by 17%.

Rising inventory and prices

This data suggests that a still significant number of homeowners are experiencing financial hardship and struggling to meet their mortgage obligations.

As a result, an increase in sales and therefore the volume of houses on the resale market is expected.

Already, according to the APCIQ, for the whole of 2024, the number of new registrations (133,778) has increased by 13% compared to last year.

And as of January 1, 2025, the number (36,230) of homes on the resale market (the inventory) was already 14% higher compared to what it was a year earlier.

More than Toronto and Vancouver

Regardless, prices don’t seem about to drop yet. Far from it. Economist Charles Brant forecasts average increases of 7% to 9% in 2025, depending on the region and the type of housing.

Royal LePage, for its part, expects Quebec to experience a price increase of 7% in 2025. The expected price increase of 6.5% in Greater Montreal should even surpass those of Toronto (5%). and Vancouver (4%).

“Quebec City will stand out, for its part, with anticipated price growth of 11%, the strongest in the country, propelled mainly by limited inventory,” notes its senior vice-president, Dominic St-Pierre.

HIGHLIGHTS:

Last year, according to the APCIQ, the median sales price of single-family homes in Quebec increased by 8% compared to 2023, to stand at $450,000. That of co-ownerships ($378,000), all regions combined, increased by 5% for the same period.

BACK TO PRE-PANDEMIC MONTREAL?

After a slow start to the year, the greater Montreal region definitely returned to normal during the fall.

So much so, notes Daren King, senior economist at the National Bank, that real estate activity in December reached “its highest level since January 2022 and is only 5.2% below its pre-pandemic level “.

Unlike the three other major Canadian cities which only experienced a significant jump in transactions from October onwards, the Montreal market stood out for a significant recovery from the first reduction in the Bank of Canada’s key rate, in June.

For the whole of 2024, the number of transactions increased by 19% in single-family homes and their median price by 7% compared to the year 2023, according to the APCIQ. The number of sales of co-ownerships (condos) increased during the same period by 21%, with an increase in the median price of 5%.

Royal Lepage expects an average price increase of 6.5% in the Greater Montreal area in 2025, which would exceed the increases forecast for the year in Toronto (5%) and Vancouver (4%).

INVENTORY IS CROSSING AND PRICES EXPLODE IN QUEBEC

Unlike the rest of the province, the real estate market in the greater Quebec metropolitan area is suffering from a significant drop in the number of properties for sale, causing some of the largest price increases in the province.

In December 2024, the median price of single-family residences in the region amounted to $411,500, an increase of 16% compared to December 2023. For the year as a whole, we are talking more about a median price of $385,000, up 10% on 2023 transactions.

The condominium market seems to be even tighter there, with an increase in the median price of 18% in December compared to December 2023. For the whole year, the median price is $270,000, or 13% or $30,000 more than in 2023.

The decline in the volume of homes for sale is the main cause of these price increases. Compared to last year, it is down 15% in single-family homes and 17% in co-ownerships.

At this rate, Royal Lepage expects price growth to reach a new record in 2025 with an 11% increase in the median price, the largest increase among the country’s large urban areas.

HIGH PRICE TRANSACTIONS INCREASE

In general, we notice everywhere in Quebec, a clear trend towards an increase in the number of house sales at prices that we automatically associated before the pandemic with the luxury niche, explains Chantal Routhier, assistant director for analysis of given to the Professional Association of Real Estate Brokers of Quebec (APCIQ).

In the greater Montreal region (CMA), the APCIQ found that during the first 11 months of 2024, the number of transactions at prices above $900,000 increased by 38% compared to last year. .

The same phenomenon was observed in the Quebec region with an even greater magnitude. On this vast territory, which includes both Quebec City and its suburb of Lévis, on the south shore, the number of houses having changed hands for prices above $700,000 has increased by almost 80%.