New federal housing initiatives and broader economic trends adds another layer of complexity to the current real estate market. The Canada Mortgage and Housing Corporation (CMHC) reports a 30,000-unit decline in 2023 housing starts, largely attributed to higher interest rates. This slowdown has particularly impacted major urban centers like Montreal, with declines ranging from 10% to 20%. While such supply constraints have been a persistent issue in Quebec, the slowdown is exacerbating affordability challenges and reshaping investment strategies.
For this reason, the multifamily sector, which has long been a stable performer in the province, continues to see increased demand as housing shortages persist. This aligns with our earlier observations about the resilience of multifamily investments, particularly in urban centers and is expected to continue throughout 2025 as the level of uncertainty diminishes. The market must navigate carefully between capitalizing on this demand and the risks associated with overvaluation in a constrained supply environment.
Building on our previous discussions about federal policy impacts, the government’s new insured mortgage refinancing product, set to launch in January 2025, introduces a new dynamic to Quebec’s rental market. This initiative, allowing homeowners to access up to 90% of their property’s value to add secondary units, could significantly alter the rental landscape. While it may increase the overall supply of rental units, it could also create unexpected competition for traditional multifamily investments. A patchwork of municipal responses also shape local real estate markets, creating diverse opportunities across the province.
Turning to the broader economic context, the Bank of Canada’s monetary policy stance adds another layer. While the U.S. Federal Reserve may pause its rate-cutting cycle at 4 to 4.25%, Canada’s underperforming economy and lower inflation suggest the Bank of Canada may make faster and larger rate cuts. This divergence, reminiscent of past periods of economic asynchrony between the two nations, could create unique financing opportunities.
However, persistent challenges remain, particularly in the construction sector. The industry’s productivity issues, which we’ve highlighted in previous analyses, continue to impact development timelines and costs. With construction accounting for 12.6% of all labor hours in Canada but showing no productivity growth over the past forty years, investors must factor in potential delays and cost overruns in their project planning.
In the multifamily sector, a nuanced picture emerges. While experiencing a slowdown in rent growth, the fundamental drivers of population growth and low supply continue to support the market. This trend aligns with our long-standing view of the multifamily sector as a resilient investment option. Investors must remain agile and well-informed. The interplay between federal housing initiatives, municipal regulations, and macroeconomic factors will shape investment opportunities in the coming years.
How are you positioning your portfolio to capitalize on these emerging trends in Quebec’s commercial real estate market? Are you considering investments in secondary markets or exploring opportunities in adaptive reuse projects? At Votre Équipe Immobilier, we’re committed to providing expert insights and guiding your investment strategies in this evolving landscape. Contact us to discuss how these market shifts could impact your portfolio and explore strategies for success in Quebec’s dynamic commercial real estate market.