Montreal Housing Bubble / Bulle Immobiliere Montreal
Desperate Sellers in Montreal.
Today, I decided to take an example to show you the real seller desperation. In all areas, it is the same problem.
This example is from Bois-Franc (in Ville Saint-Laurent). This area is so overpriced. Getting a decent 2 bedroom condo will cost you on average above 300 000$. For house, don't even think about it; a basic town house will cost you 500000$.
Lets Start!
A brand new condo is selling for 489 000$ or if you prefer to rent 1900$/month. Note that this condo, has almost no furnitures or anything . Probably the owner bought it for speculation. Usually, when they take the pictures, they rent a few furnitures for home staging to make it look like someone has been living in it.
http://www.remax-quebec.com/fr/inscription/M/27643686.rmx?source=centris
Questions
1- Is it better to rent ?
Using Garth formula (http://www.greaterfool.ca/2013/08/13/renting/)
"The simple formula is (List Price/Rent*12) – in other words, divide the market value of the real estate by the annualized rent. See what ya get. Here is one way to measure the result (as suggested by US real estate site Trulia):
- P/R ratio is lower than 15 = Listen to your mother-in-law. Buy the place.
- P/R ratio is between 16 and 20 = Nah, better off renting
- P/R ratio exceeds 21 = Your landlord is a munificent god."
489000$/(1900$*12) = 21.45
Conclusion, It is better to rent in this case.
2- Can the seller make money from renting?
Scenario 1 : 5% down payment for a 464000$ mortgage @ 5.14%.
Mortgage : 2735$/month
Municipal taxes: 300$/month
Heating: 100$/month
Condos fees: 150$/month
Home insurance : 30$/month
--------------------------------------------------------------
3315$/month
1900-3315= - 1415$/month (underwater)
Scenario 2 : 54% down payment for a 225000$ mortgage @ 5.14%.
Mortgage : 1326$/month
Municipal taxes: 300$/month
Heating: 100$/month
Condos fees: 150$/month
Home insurance : 30$/month
--------------------------------------------------------------
1906$/month
1900-1906= - 6$/month (Break even point)
Conclusion, to only break-even you need to have put 54% down payment (264000$). My example is over simplified but I can't see how this seller will make money from renting.
3- What is the price evaluation??
There is no municipal evaluation available but I decided to user zoocasa to get an idea of the price of this condo. According to Zoocasa the property today is worth 371 000$, far from the 489 000$ asking price$
4- What are the statistics from this area??
Sale (last 12 month) : 398 (down 6%)
Day to sell (last 12 month) : 104 days (up by 16 days)
http://www.fciq.ca/pdf/bar/bar_20132_mtl_fr.pdf
Is Montreal immune to an housing bubble??? The answer is obvious.
Links
"Home ownership has become less affordable for the average Canadian, but that hasn't stopped many from jumping into what may already be an overpriced market, suggests a new report from the Royal Bank.Mortgage rates will be the next challenge," Wright added. "The move upward we've seen probably suggests that affordability will be a little more challenging (in the third quarter)."
http://ca.finance.yahoo.com/news/homes-less-affordable-canadians-keep-buying-nonetheless-rbc-040129068.html
"Les condos à Montréal ont-ils pris ou perdu de la valeur cette année? À cette question toute simple, les experts ont pourtant trois réponses différentes: le Mouvement Desjardins conclut à une baisse des prix, l'Association canadienne de l'immeuble, à une hausse et la Chambre immobilière du Grand Montréal, à une stagnation des prix. Une controverse statistique qui incitera peut-être la Chambre immobilière à réviser ses pratiques.Une autre pratique qui semble unique au Québec en matière de statistiques immobilières: arrondir les variations au point de pourcentage (ex.: 1%), et non à la décimale (ex.: 1,4%) comme c'est le cas à Toronto, à Vancouver et à la Société canadienne d'hypothèques et de logement (SCHL).
«Je préfère des chiffres plus précis avec une décimale, surtout quand l'échantillon est assez grand», dit Robert Clark, professeur à HEC Montréal."
http://affaires.lapresse.ca/economie/immobilier/201308/27/01-4683498-le-casse-tete-du-prix-des-condos.php
Very informative. Please write more post =)
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