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Developers Brace for End of Montreal's Condo Boom

Sales Are Well off the Pace of Previous Years

 

By DAVID GEORGE-COSH

Nov. 5, 2013 6:12 p.m. ET

 

 

With signs that Montreal's more than decadelong condominium boom could be fading, some local developers are repositioning or even pulling projects due to waning demand.

 

 

In the downtown core, quarterly presales of new condos have averaged nine units per project this year, according to Altus Group Ltd. AIF.T -0.07% , a real-estate consultancy. That is well below the pace of such sales in both 2012 and 2011, when the average was 16 units.

 

 

Meanwhile, only 10 new condo projects were announced in Canada's second-largest city in the first half of 2013, compared with 14 such projects in the first half of 2012. At the current pace, Montreal isn't likely to match the 25 project launches announced last year, and could fall below the 2011 total of 14 projects, Altus Group says.

 

Developers have noticed. "There's starting to be a lot of uncertainty in the marketplace," said Sam Scalia, chief executive of Samcon Inc., one of the city's biggest developers with 13 projects in the works.

 

 

Nearly 1,500 people signed up for information on Samcon's 190-unit Drummond Condominiums project when the developer began presales in January, Mr. Scalia said. But sales were slow, and Samcon pulled the project from the market in May for a full redesign with a new architect.

 

 

"When we came out on the market, there was a glut of units that were launched in our district downtown," Mr. Scalia said.

 

 

When Samcon puts the Drummond project back on the market in January, units will be roughly 10% smaller and one-bedroom units will be priced nearly 33,000 Canadian dollars ($31,578) less than the initial C$275,000, Mr. Scalia said. The project is slated for completion by the end of 2016, one year later than first planned.

 

 

Montreal's condo boom, like those in Toronto and Vancouver, was fueled by ultralow interest rates that put homeownership within the reach of more Canadians. The resilience of Canada's housing sector was a key factor in helping the country weather the global financial crisis better than many of its industrialized peers.

 

 

But it also led to record household-debt accumulation, a concern for Canadian policy makers. Canadian Finance Minister Jim Flaherty singled out the overheated condo markets in Toronto, Vancouver and Montreal as areas of particular concern when he tightened mortgage-financing rules to put the brakes on the sector.

 

 

A slowdown appears to be under way. "While overall sales are good, [the condo market is] moving at a more muted pace," said Colin Johnston, president of Altus Group's Canadian research, valuation and advisory department.

 

 

Montreal's condo-resale market also is showing strain. Listings have soared 24% in the past 12 months, according to the Greater Montreal Real Estate Board. Sales, though, have fallen by 15%.

 

 

Canada Mortgage and Housing Corp., a government-owned housing agency, forecasts 10,000 new condo units will be built in the Greater Montreal area in 2013, down 16% from last year and the second annual decline in a row. CMHC attributes the slowdown to a surplus of new condos and a rise in resale listings.

 

 

"It feels like everyone who had to consider buying a condo has already done so," said Stéphane Côté, president of DevMcGill, a developer with four projects under construction. "Right now, we're on the tail end of the market."

 

 

Mr. Côté said DevMcGill has positioned its projects to withstand a slowdown. Development of the condos is structured in several phases, and if sales begin to trickle, DevMcGill can redesign units to adjust to lower demand.

 

 

Mitchell Abrahams, owner of Benvenuto Group, a Toronto-based developer, said sales of condos he is developing in Montreal are mixed. Le Peterson, a 31-story tower in the heart of Montreal, has had "slow but steady" sales with 53% of the development sold. Meanwhile, the Belvedere, a luxury development in Montreal's tony Hampstead neighborhood, closed its sales center earlier this year due to poor sales, Mr. Abrahams said, declining to elaborate.

 

 

"Montreal's a hard market for people to make a decision," he said. "But fundamentally, it's still a great condo market."

 

 

The slowdown has a silver lining. Samcon's Mr. Scalia said he is in talks with at least three developers to take on projects that haven't sold well, though he declined to identify them.

 

 

Some developers predict it will take several years for the market to absorb the excess inventory. Michael Engels, vice president of sales at Inca Development, said the slowdown isn't much of a surprise. After a rush of product coming to the market, developments still need some time to be digested by home buyers.

 

 

Montreal's condo sector has become a buyer's market. Mr. Engels expects his current project, a development along the city's trendy Crescent Street downtown, to begin construction next year after selling over 40% of his inventory so far. "Competition is always subjective, even in this tough environment," he said.

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From sales office to condo groundbreaking in a week

 

November 7, 2013. 10:23 am • Section: Real Deal

 

 

Buyers might have the upper hand in the Montreal condo market these days, but Solano developer Patrick Varin tells me Wednesday he isn’t just getting ready to open a sales office – he’s preparing to dig.

 

Translation: Varin says he will start construction next week on 139 condos, regardless of how many sell at the phase 6 launch of the Old Montreal project this weekend.

 

Sounds ballsy? Varin claims he doesn’t need to sell the usual 60 per cent of units to secure bank financing since well – he isn’t using a bank to finance the project.

 

“We hear that there’s a slowdown but we’re not feeling it,” Varin says of the project.

 

Lucky him. In Montreal, new condo construction is down by 16 per cent this year, and some developers have cancelled or are scaling back projects. Samcon’s new condo tower on Drummond St., for example, is being redesigned with smaller, less expensive condo units.

 

According to housing data from Altus Group – cited Monday by the Wall Street Journal – quarterly presales of new downtown Montreal condos have averaged nine units per project this year, down from 16 units in both 2012 and 2011. Ten new condo projects were announced in Montreal during the first six months of 2013, compared to 14 during the first half of 2012.

 

Varin said Solano has an advantage because of its location near the water and from limited competitors in the area. Interest from buyers hasn’t been as great at another project he’s working on in the city’s east-end.

 

“If I were building a condo around the Bell Centre right now I wouldn’t take the risk of digging next week because there’s so much going up,” he told me.

 

Not so for the Tour des Canadiens, another project that doesn’t seem to “feel” the slowdown. After selling out the first tower, developer Candere and partners are considering the launch of a second condo building near the Bell Centre.

 

What’s holding the developer back? Fear that the city will nix their plans to construct an overpass from the Bell Centre to the building that would be located south of Saint Antoine St.

 

Concern over a lack of buyers? Didn’t cross their minds.

 

[email protected]

@RealDealMtl

http://blogs.montrealgazette.com/2013/11/07/what-slowdown-condo-developer-promises-groundbreaking-in-a-week/

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In short, i presume the most successul projects will be the ones that "stand out of the crowd" (both architecturally and concept-wise), and/or are located on prime location, AND have a significantly lower cost ratio for all they offer.

 

Thus, Peterson and Tom on little known streets have a harder time selling units, in spite of them being very central and close to most amenities future residents would seek...

 

I also believe this slump is in part due to the belated local aftershocks of the recent global economic crisis, and perhaps in some less measurable way to the relatively overheated Quebec political climate (after the student strikes, and now the charter of Qc values bill, which feels like an impending threat to many minorities).

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In short, i presume the most successul projects will be the ones that "stand out of the crowd" (both architecturally and concept-wise), and/or are located on prime location, AND have a significantly lower cost ratio for all they offer.

 

Thus, Peterson and Tom on little known streets have a harder time selling units, in spite of them being very central and close to most amenities future residents would seek...

 

I also believe this slump is in part due to the belated local aftershocks of the recent global economic crisis, and perhaps in some less measurable way to the relatively overheated Quebec political climate (after the student strikes, and now the charter of Qc values bill, which feels like an impending threat to many minorities).

 

La limite de 25 ans des hypothèques décidée par Ottawa aussi a joué un rôle important. N'oublions pas. Bien plus que que les étudiants, dont les conséquences sont bien moins tangibles que la durée et le montant des paiements à effectuer après l'achat d'une maison!

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La limite de 25 ans des hypothèques décidée par Ottawa aussi a joué un rôle important. N'oublions pas. Bien plus que que les étudiants, dont les conséquences sont bien moins tangibles que la durée et le montant des paiements à effectuer après l'achat d'une maison!

 

Fort probablement, mais en fait je crois que le climat politique divisif du Qc a aussi une influence non négligeable.

 

Et bien sûr le fait que ça se bâtisse *aussi* un peu partout dans une genre de demie-lune au sud du c-v qui commence à Westmount, se rend jusqu'à Pointe-St-Charles, englobe une bonne partie de St-Henri / Petite-Bourgogne / Griffintown, puis finit dans le Vieux-Mtl et les abords du QdS (et c'est sans compter l'ÎdS, et les nombreux plus petits projets qui se multiplient dans le Plateau, Rosemont, HoMa, etc.)

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Ceci ne va pas aider les ventes si ça arrive :

 

Via LaPresse :

 

Flaherty prêt à resserrer de nouveau les règles hypothécaires

 

Publié le 13 novembre 2013 à 06h35 | Mis à jour le 13 novembre 2013 à 06h35

La Presse Canadienne

Ottawa

 

Le ministre fédéral des Finances, Jim Flaherty, se dit prêt à resserrer de nouveau les règles sur les prêts hypothécaires si le marché canadien de l'habitation continue de chauffer.

 

 

Dans sa Mise à jour des projections économiques et budgétaires de 2013, rendue publique mardi à Edmonton, M. Flaherty a présenté la dette à la consommation, qui atteint des niveaux presque records, et la relance du marché de l'habitation comme la principale menace nationale à l'économie canadienne.

 

 

Lors d'une séance de questions et réponses, le ministre a rappelé avoir agi par le passé dans un contexte de marché de l'habitation en état de surchauffe, ajoutant qu'il le ferait encore une fois si cela s'avérait nécessaire.

 

 

M. Flaherty a aussi affirmé qu'il fallait être à l'affût des bulles dans les marchés du monde entier, incluant le marché résidentiel canadien, ajoutant être intervenu à quatre reprises ces dernières années.

 

 

Le ministre des Finances a pour la dernière fois resserré les règles hypothécaires en place en 2012. Bien que cela ait provoqué un sérieux ralentissement des ventes et mises en chantier de domiciles, les derniers mois ont vu les ventes reprendre et les prix continuer de grimper, quoiqu'à un rythme plus modéré qu'auparavant.

 

 

De nombreux analystes estiment que la reprise actuelle est un phénomène temporaire causé par des acheteurs soucieux de transiger avant la hausse attendue des taux d'intérêt.

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Je trouve ca poche pour des jeunes de mon age. J'ai eu de la chance et j'ai aussi fait un gros sacrifice pour pouvoir habiter en ville mais je sais que c'est impossible pour certain et resserer les regles pour les plus jeunes cest eloigné cet acces!

 

Sent from my SGH-I337M using Tapatalk

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