Wealthy Global Buyers Favoring Montreal Spur 17% GainsGreg Quinn
Fabien Ricard and Richard Montoux bought a four-bedroom brick row house with a butler’s pantry in Montreal’s Westmount district this year. The couple from France chose Montreal over Toronto or Vancouver, saying its boutiques and bilingual culture made the metropolis more international.
“We live a little bit like French people in North America, which isn’t possible in Toronto,” said Ricard, 32, who paid C$1.15 million ($1.05 million) with his partner for their new home. “The image Montreal projects in France and elsewhere is the life of the whole world.”
International buyers have thrust Montreal, a city sometimes overshadowed by Toronto and Vancouver, into the national spotlight. Montreal, known for its crumbling water pipes and bridges as much as its cobblestone streets, now stands out for drawing the biggest share of foreign owners. They purchased 49 percent of the 206 homes worth at least C$1 million in the first half of 2013, according to a Sotheby’s International Realty Canada report and survey of brokers.
In Vancouver, which boasts a rugged Pacific coastline and cultural ties to Asia, 40 percent of buyers of 1,239 such homes were from abroad. Toronto, which has filled its skyline with condo towers over the last decade, had the smallest portion of international owners, making up 25 percent of 2,947 deals.
“The share of foreign buying in the Montreal luxury market surprises me,” said Craig Alexander, chief economist at Toronto-Dominion Bank. “When we think about the presence of international buyers we tend to think about Vancouver and Toronto.”
International buyers are shoring up high-end housing in Canada after regulators tightened mortgage rules in 2012 to cool the nation’s booming market. In Montreal, prices of bungalows of around 1,200 square feet (111 square meters) rose as much as 5.4 percent in the third quarter from a year ago, according to figures from Toronto-based Royal LePage Real Estate Services.
Dwellings of at least 3,000 square feet worth about C$2.47 million in the Westmount area gained 16.9 percent in the same period. In Vancouver and Toronto, price growth of luxury housing in some neighborhoods also outpaced less costly homes, the data show.
Julie Dickson, who heads the Ottawa-based Office of the Superintendent of Financial Institutions, said scant data makes it difficult to determine the impact of foreign buyers on the market.
“There is anecdotal evidence at a minimum that foreign investment plays a big role, particularly in Vancouver. And while I think that means Canada is a great place to do business, it also is a risk because it can dry up quickly,” Dickson said during a Nov. 25 presentation in Toronto.
The majority of international buyers of large single-family homes in Montreal are from China, Syria, Mexico, Russia and the U.S., according to Vancouver-based Sotheby’s survey. They typically are married with children and buy a home worth at least C$3.5 million with 5,000 square feet. About 80 percent of them earn more than C$500,000 a year and work in finance, technology, law or are entrepreneurs.
Ricard and Montoux, the French couple, said they are using their Montreal house as their main residence and took out a mortgage to deepen their ties in Canada by establishing a credit history. Ricard, who works in nuclear medical imaging, said it’s difficult for new immigrants to get a mortgage because the bank required that they had at least 60 percent of the home’s total value to qualify.
“We got a mortgage very soon after our arrival but just because we already had transferred some money from France,” Ricard said. “Otherwise it would not have been possible.”
Canada’s housing market took off in 2009, fueled by low interest rates. Housing became a main source of economic growth, with annual resale price increases of as much as 13 percent in May 2010. Price gains slowed to 3.1 percent as of October partly because of a new rule that shortened the maximum amortization period on mortgages the government insures to 25 years from 30 years. Bank of Canada Governor Stephen Poloz today kept his main interest rate unchanged at 1 percent and said he expects a “soft landing” in the housing market that has been stronger the bank expected.
In Toronto, the condo boom has lured international buyers, transforming Canada’s largest city. Condo developers in the city led a record number of high-rise projects in North America last year, squeezing out everything from cookie factories to parking lots.
Donald Trump’s 65-story luxury condo tower in Toronto opened in 2012. In Yorkville, the city’s high-end shopping district, one condo was listed for sale in late November for C$15 million. It boasted five bathrooms, an indoor pool, six balconies, four underground parking spots and a monthly maintenance fee of C$8,224.
In Vancouver, where 15 percent of the population speaks a Chinese dialect as a first language, people from China are the largest group of foreign buyers, according to Sotheby’s survey. They are often buying second homes or investment properties.
While the entry point for a Vancouver single-family luxury home is C$2.8 million, the city in late November offered the most expensive home for sale in Canada by its main broker network: a C$35 million duplex once inhabited by a Lieutenant Governor. The 12,216-square-foot home a few kilometers south of Stanley Park has nine bedrooms and 13 bathrooms.
High prices in Vancouver, Canada’s third-largest city, are driven more by a land shortage and population growth than foreign investors, said Helmut Pastrick, chief economist at Central 1 Credit Union.
“Just like Toronto and Montreal, people continue to move into the metropolitan area, increasing the demand for housing,” in Vancouver, Pastrick said. “We are still going to be having this conversation about high prices 20 years from now.”
Montreal, whose downtown is stocked with cafes and clubs, attracts global buyers with its Old World charm, said Sacha Brosseau, Quebec director of operations for Sotheby’s. This year, the brokerage was selling a C$6 million house in Westmount owned by a Middle Eastern family and four out of the first six potential buyers were also non-Canadians. They appreciate the city’s more relaxed lifestyle. Montreal residents still buy alcohol at any shop -- they don’t have to go to a government licensed store.
“There is absolutely a clear distinction between Toronto and Montreal,” Brosseau said. “Montreal is known for more quaint areas, very European feel, like Old Montreal with the cobblestones, horse and carriages.”
Ricard and Montoux were drawn to Westmount’s ample park space for their two dogs and good shopping.
“There is really everything to do within walking distance,” said Montoux, 31, who works in the luxury eye care business and marketing.