Real Estate Talk:
Purchasing beyond the city
Why there is an increased demand for primary homes outside the urban area
By Joseph Marovitch
Prior to the pandemic, the real estate market was booming due to several factors. The economy was sailing along smoothly, there were no major political hiccups, unemployment was decreasing, households had more disposable income, and there was a shortage of property to sell and land to build on in Montreal. As space to build and property to sell diminished prices rose. In economics 101, lower supply + higher the demand = rising prices.
The pandemic temporarily changed the scenario bringing the real estate market to a halt. Now, as the market reopens, with our adjusted behaviour and habits to continue combating COVID-19, all the factors that enabled the market to flourish pre-pandemic, are still in play. There is still a shortage of land to develop, inventory is still low, demand to buy never ceased and has actually increased. All these factors are causing prices to rise once again but slowly. In time the momentum will pick up speed.
However, there is another strong factor now in the mix with low inventory, diminished property for sale, and rising prices, that is propelling buyers to purchase outside the city. The additional factor is COVID-19.
‘Between the fact that a buyer can purchase less for their dollar in the city, and the fact that living with others in close proximity now increases the risk factor of contracting COVID-19, the idea of moving to the country is very enticing.’
While we were all quarantining for the past three months, people had time to re-evaluate their life priorities and decide what is really important. We all discovered we can work from home with less expense.
Between the fact that a buyer can purchase less for their dollar in the city, and the fact that living with others in close proximity, as we do in downtown, now increases the risk factor of contracting COVID-19, the idea of moving to the country with open spaces and panoramic mountain and/or lake views is very enticing. A buyer can also purchase much more for their money in the countryside whether it be the Laurentians or Eastern Townships. Stress is reduced and life can be significantly enriched. In the past four weeks, I have received more requests to visit property in the Laurentians for the purpose of relocation than to purchase a 2nd home than ever before.
If the Montreal market returns to the status quo of rising prices as before the pandemic, the next wave of rising real estate prices will be outside the city as demand grows.
Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.
Next article: Purchasing a country/2nd home
State of the market
New stringent mortgage rules
Based on revised studies of the current economic circumstance, the Canadian Mortgage and Housing Corporation (CMHC) has decided to make the rules for acquiring mortgage insurance more stringent as of July 1. All indications point to a 9 to 18 percent drop in home prices over the next 12 months according to the CMHC. The new rules would entail not allowing a buyer to put down less than 20% on a loan. Where the minimum credit score used to be 600, it will now be 680.
These new rules will make it more difficult for buyers to acquire a mortgage and will slow the pace of rising prices, which in turn, will make residential property possibly more affordable to the average buyer. Note there is a housing shortage in Montreal causing prices to rise and rents to increase. These new measures are an attempt to curtail the problem.
‘The new rules would entail not allowing a buyer to put down less than 20% on a loan. Where the minimum credit score used to be 600, it will now be 680.’
There is much more to discuss in terms of solving the housing shortage and providing further solutions, such as more government funding, rent controls, more subsidized housing.
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Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or firstname.lastname@example.org