The work of real estate brokers is sometimes blamed for the rapid increase in property prices in Quebec, but it’s mainly a lack of housing inventory that’s driving up prices, says a new report by The Quebec Professional Association of Real Estate Brokers (QPAREB).
The report identifies a series of factors arising from the pandemic that exacerbated the situation and created what might be called a perfect storm, the association says, where supply was clearly insufficient to meet the unanticipated demand.
“The brief we submitted to the Ministre des Finances contains a thorough and rigorous analysis that clearly shows that price increases are due to the insufficient number of properties put up for sale,” says Denis Joanis, president and CEO of QPAREB. “It’s important to note that this situation was already taking shape before the pandemic, both in Quebec and elsewhere in Canada. In Quebec alone, we estimate the supply deficit at more than 40,000 units. Our brief also identifies 10 or so other factors which, combined together, explain the rise in prices.”
Charles Brant, director of the QPAREB’s Market Analysis Department, says weak incentives for single-family residential construction have failed to sustain supply, even though there has been significant growth in demand for over 20 years. “The measures taken by governments over the last decade to avoid overheating and household over-indebtedness have focused more on controlling demand than on encouraging the construction of new units to increase supply,” he says.
QPAREB’s brief also says real estate brokers cannot be blamed for cases of overbidding for houses.
“Like so many other professionals, real estate brokers have had to deal with the effects of the pandemic in their daily work: health constraints, sellers’ apprehensions as well as the frenzy and emotions of their buying clients,” says Joanis. “To balance all of this and to ensure the safety of everyone concerned, brokers have had to show initiative, resourcefulness and empathy, in addition to dealing with an incredible workload. It is also important to remember that brokers have an obligation to obtain the best possible outcome for the clients they serve. It’s normal for a seller to take steps that will maximize the price and terms of the sale.”
The QPAREB’s brief looks at the pandemic’s contributing factors to the rise of the real estate market:
A relatively large segment of the labour market did not experience income disruption.
Almost 80 per cent of the jobs lost since February 2020 were in the most precarious occupations, a significantly higher share than in a more conventional recession.
The majority of households experienced no negative impact on income.
Government measures to assist businesses and households have increased disposable income, which encourages the resale market. This is not just a Quebec or Canadian phenomenon – overall household wealth has increased globally, says the association.
Rock-bottom interest rates…
…which have been at historically low levels played a major role, making it much easier to buy a property and thus contributing to the upward pressure of demand on supply.
The lockdown pushed many Quebec households to increase their comfort level.
The pandemic accelerated the organization of the service sector around teleworking and led to a change in the housing preferences of households, says the association. Those who were not yet homeowners wanted to become owners, while many experienced buyers competed for spacious single-family homes.
The report says the number of buyers from the Montreal area who purchased a second home in the Estrie, Brome-Missisquoi, Laurentides and Lanaudière regions alone has increased by 62 per cent.
Some aggravating factors relate to the impact of the pandemic on supply, it says.
Construction delays and costs have limited the supply of new properties. Older people who fear moving to a retirement home are postponing their plans. And during the lockdown, many sellers postponed their plan to put their home up for sale, while others took their property off the market for fear of possible contamination.
The report also says, “The stress, fatigue and anxiety created by the extreme lockdown measures led to the breakup of many couples, resulting in one spouse seeking a new home” and adding pressure to the market.