City's downtown area experiencing a boom and buying frenzy, brokers say
(MONTREAL) When Patrice Groleau began selling a proposed condo development this spring, he thought it would take about a year to sell all 100 units - even though the site is in Montreal's historic old city and the project will have all the latest amenities.
Half the apartments sold in the first month on the market.
'The last few years have been mostly good for real estate, but this year has been phenomenal,' said the 33-year-old broker, who works for McGill Immobilier. 'Some of the buyers are from elsewhere but 95 per cent are local young professionals. A lot of them will buy several units or whole blocks of apartments.'
Real estate markets in many cities around the world are still in the doldrums, but in Montreal, Canada's second largest city, with 1.9 million residents, the downtown area is experiencing a boom and buying frenzy last seen more than a generation ago. Brokers say that new listings in desirable central neighbourhoods can receive multiple offers within hours of going up for sale.
Since 2003, when the present rush began, 5,500 to 7,000 new condo units have been hitting the market each year. Many of these homes are downtown in new mid-rise developments.
According to the Montreal Real Estate Board, the median price of downtown condos has risen about 9 per cent over the period, to C$210,000 (S$285,500). While some downtown addresses can command as much as C$1,000 a square foot, in May the average price per square foot in the central city was about C$350.
'A lot of the new units downtown are for people in the suburbs looking to downsize, but you also get about 8 per cent of sales going to foreigners,' said Rene Lepine, president of Groupe Lepine, one of the largest developers of downtown residential housing in the city. 'I haven't seen this kind of activity in the city centre since the 1970s, when we had the Olympics.'
Montreal's real estate board reported that prices were up 8 per cent in the first quarter from a year earlier, with sales up 54 per cent.
While there is disagreement over whether such growth is sustainable, demand is being driven by historically low interest rates, with a five-year fixed-rate mortgage going for about 3.8 per cent.
In an attempt to pop what many fear is an expanding housing bubble, the Bank of Canada in April began requiring purchasers to put down 20 per cent on investment properties. Brokers, however, say such rules are easily skirted with interim financing.
And in the two years since the global economic downturn, Canada's big-five banking oligopoly has continued granting loans for real estate.
But, like in the US, these banks seldom hold on to the mortgages, instead passing them on to a government entity called the Canada Mortgage and Housing Corp, which insures buyers against defaults.
Since 2005, the agency's liabilities have grown to around C$400 billion from about C$80 billion. But many of the new homes insured by this national agency are the tiny studios and one-bedroom units like those in Montreal's downtown towers.
That easy financing helped turn Montreal's real estate scene into something of a Sleeping Beauty story. For decades the city had a lot of real estate for sale, partly because of the departure of several hundred thousand English-speaking residents from 1976 to 1978 because they feared Quebec might become an independent French-speaking country.
Afterwards, prices rose slowly, and then took off in recent years.
'I'm not one of those annoying people who say that Montreal is the best city,' said Ariane Truong, 30, a Montreal native who spent several years in London working as an architect.
'But there's this intangible, aesthetic quality here these days and when you're in other cities, you notice that quality is missing.'
Two years ago Mrs Truong returned to her hometown, paying about C$350,000 for a refurbished 950-square-foot one-bedroom condo in the old city.
The building incorporates part of the stone fortifications built from 1717 to 1738 to protect Montreal from native Indians and English attackers.
Until recently, many residents had spurned the area as a tourist magnet.
These days, the tourists still are ever-present, but the old warehouses have been converted into apartments with ground-floor cafes and restaurants. A mix of young professional residents has returned to live and work.
A small but important part of the market is composed of foreign clients who buy into the city for its particular rhythm.
Diane Urbain, 28, a transplant from Paris, is typical of the group. She and her husband spent about C$520,000 on a 1,600-square-foot cottage in the Plateau, a large neighbourhood of row houses known for its public squares and cafes.
The French consulate says about 100,000 French citizens are living in Montreal.
'When I first arrived here as a student, I thought I'd never leave Paris,' Mrs Urbain said 'But I've come to love the way of life of this city.' She talked about the nearby parks where her children play and about biking to work. Velo Quebec, a cycling advocacy group, says that nearly 20 per cent of downtown residents use bicycles as a primary means of transport.
Yet the French are not the only people who choose Montreal.
This year, almost all the units in one new high-end condo tower downtown were sold to Lebanese. The developer marketed heavily in Beirut, and many purchases were made as investments or as homes for children attending universities in Montreal. -- IHT
Source: Business Times, 15 Jun 2010
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