The recent 2024-2025 budget presented by Quebec’s Finance Minister, Éric Girard, has raised significant concerns within the construction and real estate community, particularly among professionals and investors in commercial real estate. 

Despite an explicit acknowledgment of the growing imbalance between housing supply and demand, the measures taken are insufficient to significantly stimulate construction starts, a crucial aspect for Quebec’s real estate market and, by extension, for the commercial real estate sector.

The Quebec Association of Construction and Housing Professionals (APCHQ) expressed its disappointment over the lack of strong incentive measures, such as the exemption of the QST (Quebec Sales Tax) on new rental housing, a measure adopted in all other Canadian provinces and at the federal level. 

This exemption could have served as a catalyst to accelerate residential construction, with positive spillovers into the commercial real estate market by increasing housing supply and stimulating the local economy.

The budget highlights some positive commitments, such as investment in social and affordable housing, as well as initiatives to increase the workforce and productivity in the construction sector, but these measures do not fully meet the immediate needs of the market to combat the housing crisis and promote sustained growth in the real estate sector.

The lack of direct support to encourage construction starts in residential construction and robust fiscal incentives for new developments has been seen as a missed opportunity by several market players which criticized the budget for its lack of initiatives to stimulate construction, as noted in the recent budget. 

In it’s current state, it is poised to slow the momentum of both residential and commercial real estate projects furthermore. For investors, this translates into potentially fewer opportunities for new commercial spaces that typically accompany residential developments. This situation could lead to diminished demand for retail, office, and mixed-use spaces, especially in areas slated for residential growth. Investors may find it necessary to adjust their growth expectations for certain markets and consider the long-term impacts on property values and the demand for commercial rentals.

This situation underscores an opportunity for the government to reconsider more aggressive measures in future budgets to address the housing crisis and promote economic growth.

The budget’s silence on streamlining regulatory processes and supporting faster construction timelines presents a hurdle in the form of project delays and escalated costs. The absence of measures to alleviate regulatory burdens means that commercial projects could face protracted approvals and construction phases, impacting investment returns. 

Moreover, the complexity and unpredictability of the regulatory environment could lead to increased project costs, affecting the feasibility and profitability of commercial real estate investments. Investors might need to consider more conservative project timelines and cost estimates, as well as allocate additional resources for navigating these regulatory challenges.

Overall, the highly anticipated Quebec budget miss the mark for targeted and high level measures that could have alleviated the housing crisis, preferring to act in a wait and see approach and risking to see the current crisis amplify over the next months and years.