Pandemic’s Impacts on Montréal’s Rental and Resale Market

Highlights

• The pandemic may impact the dynamics of the Montréal real estate market on several fronts. For example, a larger supply of homes for sale or for rent would increase the choice for households in the metropolitan area and would also reduce pressure on prices or rents.
• Since the start of the pandemic, the number of condominiums put up for sale has increased rapidly in some central Montréal sectors, particularly Griffintown. However, the share of investors responsible for the new condominium listings in this sector is no higher than in the past.
• The number of units available for long-term rental since the start of the pandemic has increased more rapidly in sectors with a high concentration of short-term rental units or students.

How has the supply of units for sale and for rent in Montréal been affected by COVID-19?

The COVID-19 pandemic has disrupted the lives and habits of millions of people around the world in recent months. This includes thousands of residents across Quebec and in Montréal.

Among its impacts, the closure of borders has led to a drastic decline in international tourism. Also, in people coming to Quebec permanently (immigrants) or temporarily (non-permanent residents). The university studies of thousands of local and international students have also been disrupted, with many courses now being taken remotely.

In light of these unusual circumstances, it becomes interesting to look into how the Montréal real estate market has recently evolved, particularly in sectors where there is generally a significant concentration of short-term rental units and/or students.

For example, an increase in the number of units for sale or for rent could increase the supply for Montréal households and reduce pressure on prices and rents. Such an increase in supply and its impacts could also vary among the different geographic sectors and housing types (purchase or rental) in Greater Montréal.

Should the current situation persist, analyzing the most recent data helps us determine in which direction the market might evolve over the next few quarters.

We set out to answer these questions:

• How has the number of condominiums for sale in Montréal changed in recent months? Do some sectors stand out? Are there more investors looking to sell their units on the market?
• Have there been more units offered for rent in Montréal in recent months? Do some sectors stand out in this regard?

The answers to these questions will help us better understand the Montréal real estate market during the pandemic. They will ultimately tell us how the affordability of units for sale or for rent might evolve in certain sectors of Greater Montréal.

The proportion of new condominium listings from investors does not appear higher during the pandemic

From January to March 2020, before the crisis, new condominium listings were following the general trend of recent quarters and moving lower¹ in all large sectors of the Montréal census metropolitan area.²

Not surprisingly, the confinement and health measures introduced in April and part of May drastically reduced residential market activity throughout the metropolitan area.

The story was entirely different in June, when the number of new condominium listings increased significantly in several sectors in the Greater Montréal area.

It is likely that some of these increases were due to sellers in catch-up mode. They would have normally put their properties up for sale in April or May, but given the exceptional circumstances, they postponed doing so until the following months.

Table 1 shows new condominium listings for several city sectors in two time periods: from January to March and from April to August.

* Geographic sector definitions from the QPAREB, with the exception of the suburbs and the Island of Montréal excluding the city of Montréal.

Source: QPAREB via Centris^©, CMHC calculations.

As table 1 shows, the vast majority of sectors recorded fewer condominium units for sale between January and March 2020. However, the Griffintown zone in the borough of Le Sud-Ouest, and the heart of the Ville-Marie borough,³ showed gains of a few dozen units.

It was an entirely different story from April to August, when most sectors saw increases in new listings. The phenomenon was more pronounced on the Island of Montréal than in the suburbs. In the Griffintown zone, the number of condominiums for sale more than doubled compared to the same period last year. Some areas of the Ville-Marie borough and some other boroughs also posted significant increases.

Montréal’s central sectors were not the only ones to have experienced significant increases in the numbers of condominiums for sale. Supply also increased in the downtown cores of other major Canadian cities, such as Toronto and Vancouver.

Unfortunately, it is impossible to know precisely why owners put these units up for sale on the market. In addition to the changes at the personal or professional level that can normally lead to such a decision, all the upheavals in the current environment (telework, confinement, etc.) likely also played a role.

In the more specific case of Montréal, given that Griffintown and the heart of the Ville-Marie borough have significant concentrations of short-term rental units and are also full of local and international students,⁴ one question immediately comes to mind. Is it possible that investors, that is, people who do not use their condominiums as their primary residence, decided to put their units up for sale on the market because of the current situation?

Exploring data from the property assessment roll (see methodology section), we were able to estimate the proportion of condominiums put up for sale by investors since the start of the pandemic. The analysis in this report focuses only on the sector that has seen the strongest growth in supply in recent months: Griffintown.

From April to August 2020, about 30% of new condominium listings on the resale market came from investors in the Griffintown sector. This figure may appear high at first glance, but data from April to August 2019 also indicate a percentage hovering around 30%.

A 2016 Housing Market Insight⁵ using the same methodology had also shown that about a third of condominiums were owned by investors in the Griffintown sector.

The share of sales from investors in recent months was therefore no different than in the past.⁶ This does not mean that investors in Griffintown did not recently put their condominiums up for sale on the market because of the turmoil created by the pandemic.

This rather suggests that, even in the pandemic, investors are not playing a larger role in new listings than in the past. In other words, the strong increase in the number of condominiums for sale in Griffintown is being caused as much by investors as by homeowner households who live in this sector and who have decided to sell their units.

We wanted to explore, using the land register data, the city of Montréal sectors from which the people⁷ who purchased a single-family home in the suburbs between January and September 2020 came, as they could be people who decided to leave the city.

Of all the subsectors in the city of Montréal, it was in the heart of Griffintown (as well as in the adjacent parts of the borough of Ville-Marie^8,9) that the strongest growth in transactions of this type was seen between 2019 and 2020.¹⁰ The increase was in fact more pronounced in the months from June to September.

Data on these new buyers who left these central sectors of Montréal to purchase a single-family home in the suburbs also indicate that the vast majority of them previously lived in condominiums¹¹. It is possible that, in the current situation, the suburbs have become more attractive, and this may have resulted in an increase in new listings of condominium for sale. Given the time that can pass between a new listing of a condominium on the market, its sale, and the closing of the transaction with the notary, we will still have to wait a few months before we can verify this hypothesis.

We will be following the evolution of new listings with great interest over the next few months to gain a better understanding of which direction the condominium market might take during the pandemic.

More long-term rental units in Montréal’s more central sectors

In the previous section, we determined that the more central sectors of the city of Montréal had seen a sustained increase in the number of condominiums for sale. What about the number of units¹² offered for long-term rental on the market?

One of the key challenges in answering this question is that there is currently no high-frequency¹³ database containing data on all rental units in the metropolitan area over a multi-year period.

The Centris^® database has provided the numbers of rental units in the metropolitan area for several years, allowing for a better measure of changes over time. Rental units can be advertised on several platforms other than Centris^®, which means that this system reflects only a portion of market activity.

The share of rental units offered on Centris^® relative to all platforms can also vary from year to year — another factor that could skew our reading of the changes in the numbers of rental units over the past few years.

Aside from these data limitations, we examine the numbers of dwellings offered for long-term rental on Centris^® over the past few years in several Montréal sectors, particularly during the pandemic.

To this end, the data in figure 1 show the numbers of units newly offered on Centris^® from April to August 2020¹⁴ and during the same months in recent years in the Montréal CMA.

* The units may be condominiums or rental apartments.

Source: QPAREB via Centris^©.

After being relatively stable since 2016, the supply of rental units on Centris^® jumped by 29% in the months following the start of the pandemic¹⁵ from 5,470 units in 2019 to 7,077 units in 2020. Further analysis indicates that the increase was not uniform across all of Montréal. In the suburbs, there was a 2% decrease in the number of units for rent on Centris^® from April to August 2020,¹⁶ while the city of Montréal rather registered a hike of 37%.¹⁷

Significant gains were also observed within the city of Montréal. Boroughs such as Ville-Marie, Le Sud-Ouest, Le Plateau-Mont-Royal and Rosemont–La Petite-Patrie saw significant increases in the numbers of units offered since the start of the pandemic.¹⁸ Together, these boroughs actually registered a gain in their number of rental units that was five times greater than the increase recorded for the rest of the city of Montréal (see table 2 and figures 2 and 3).

* The units may be condominiums or rental apartments.

Source: QPAREB via Centris^©, CMHC calculations.

* The units may be condominiums or rental apartments.

** City of Montréal excluding the following boroughs: Ville-Marie, Le Sud-Ouest, Le Plateau-Mont-Royal and Rosemont–La Petite-Patrie.

Source: QPAREB via Centris^©.

* The units may be condominiums or rental apartments.

** City of Montréal excluding the following boroughs: Ville-Marie, Le Sud-Ouest, Le Plateau-Mont-Royal and Rosemont–La Petite-Patrie.

Source: QPAREB via Centris^©.

Some boroughs such as Outremont and Villeray–Saint-Michel–Parc-Extension also experienced sustained increases, although in absolute numbers they represent fewer units.

The boroughs and subsectors presented in table 2 where large increases were recorded actually have some things in common:

• they all have a large student population¹⁹ and/or
• a relatively large share of units offered²⁰ on the short-term rental market²¹

With many university courses being offered remotely and international tourism at a standstill, the number of units offered therefore appears to have increased considerably in sectors where the student population and short-term rentals are high. Nevertheless, it remains difficult to measure the precise relative impact of each of these two factors on this increase. On the one hand, it is plausible that fewer students have needed to rent apartments in recent months, given the current situation.

On the other, a recent study in the Canadian Journal of Urban Research²² tells us a bit more about the short-term rental situation in Montréal. This study shows that, among all of Canada’s major urban centres, Montréal is the area where the housing units offered on Airbnb are the most geographically concentrated²³.

It was also in Montréal that the commercialization of the units was the most significant. In other words, the city had the highest proportion of rental income from people²⁴ renting more than one unit (multi-listings).

Given the pandemic circumstances, it is plausible that people²⁵ with multiple units, likely concentrated in the most central sectors of Montréal, decided to put these units back on the long-term rental market.²⁶

The increase in rental supply determined through the Centris^® data also appears to be supported by other sources.²⁷ These sources indicate that the number of units on the Island of Montréal listed for rent on other rental platforms (Kijiji, LesPAC, etc.) has increased strongly in recent months, but this was less the case in the suburbs.

Also, the proportion of furnished apartments among these apartments was higher than in the past. This indicates that they may have come from the short-term rental market and/or be intended for students.²⁸

In the coming months, if Montréal’s more central sectors continue to see their supply of units for rent increase, they could experience more significant changes in their vacancy rates as well as lower pressure on rents.

About this analysis

The results presented in this analysis are a first step in identifying some of the pandemic’s impacts on the rental market and the resale market in the Montréal CMA. As the impacts of this crisis continue to be felt and are likely not yet fully known, further research is needed.

The results of the 2020 CMHC Rental Market Survey, to be released in early 2021, should provide answers to some of these questions.

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• Housing Market Insight — Montréal CMA
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