Does Montreal’s building boom signal an opportunity or a risk?

Montreal’s reputation for old-world elegance and European sophistication has long appealed to outsiders. The francophone metropolis, the largest city in the province of Quebec, has one of the most ethnically diverse populations in Canada and often ranks near the top of global quality of life surveys. Unesco recognised it as a City of Design last year for its blend of history, art and culture.

Yet unlike other Canadian cities such as Toronto or Vancouver, which have seen sharp increases in home prices, Montreal’s real estate market has remained surprisingly sedate. Property values in the city have been relatively flat for several years and declined 0.7 per cent in July compared with the same period in 2014, according to the Canadian Real Estate Association.

Yet there are signs that Montreal’s property market is poised for growth.

Notwithstanding stagnant prices, as more foreign buyers enter the market, the overall pace of home sales has quickened over the past 12 months. A weakening Canadian dollar (or “loonie”) is also continuing to make real estate cheap. The loonie is down almost 25 per cent against the US dollar since the winter of 2013, the biggest two-year drop on record, according to BMO Capital Markets. And Canada Mortgage and Housing Corporation (CMHC) is predicting sharper growth for property prices, forecasting values to rise 8.4 per cent in 2016.

The confluence of favourable economic data is fuelling a building boom in some of the most desirable districts. Developers have broken ground on 7,886 condominium units in downtown Montreal this year, according to the Altus Group, a Canadian real estate advisory company. Many of the properties are glossy towers targeting the upper end of the market, says Amy Assaad, an estate agent specialising in a condo development for Royal LePage Heritage. “The newer developments are going up downtown or on the waterfront. Those areas are appealing to buyers especially from outside of the city,” says Assaad.

George Olivier, co-owner of Abbey & Olivier Real Estate Agency, estimates that foreign buyers, mostly from Asia, the US and Europe, make up about 15 per cent of the market in Montreal, roughly double the 2010 figure. Though Asian buyers account for about 10 per cent, buyers from the US are arriving in larger numbers, says Olivier.

“The Canadian dollar has dropped much more against the US dollar than against other currencies like the euro, the British pound and the Japanese yen,” he says. “That’s created real buying opportunities for Americans.”

The top end of Montreal’s property market starts in the districts of Westmount and Notre-Dame-De-Grâce, leafy, affluent neighbourhoods in the west end of the city. Renovated larger homes with four or five bedrooms in these areas range in price from C$4m to C$9m ($3m to $6.7m).

Sotheby’s International Realty Canada is marketing a four-bedroom home, with a garden and pool, in Westmount for C$6.54m.

Golden Square Mile, a 10-block stretch in downtown Montreal lined with boutiques and restaurants, has seen the biggest boom in condo construction. Areas near the Centre Bell, the sports and entertainment complex, such as downtown south and Griffintown, have also proven fertile ground.

Condo properties attracting buyers downtown include Yul Condos, Redfern and Tom Condos, with prices from C$600 to C$800 per sq ft for mid-level homes and C$900 to C$1,100 per sq ft for apartments at the upper end.

A three-bedroom apartment is on sale for C$3.43m at Le 215 Redfern, a new 60-unit condominium in Westmount. The residence measures 3,161 sq ft with three bathrooms. The building includes a fitness centre, a rooftop pool and valet parking, and according to its developer 85 per cent of its units have been sold. Tom Condos is marketing a three-bedroom penthouse apartment with hardwood flooring for C$2.04m. The 318-unit, 40-storey tower is expected to be completed late next year.

The condo boom has, however, sparked fears of overbuilding as many of the new developments still struggle to find buyers. The number of unsold apartments at new condos reached 2,832 in the first quarter, according to CMHC. That figure could surpass the peak of 3,473 empty units reached in 2006 by the end of this year, the agency predicts. Condos are also taking longer to sell, at an average of 120 days, up from 80 days in 2011.

Georges Gaucher, of Royal LePage, says the oversupply is benefiting buyers. “The market is more balanced and competitive so you don’t see these enormous price spikes or declines,” he says. “This is keeping prices in check and that’s advantageous for buyers.”

Despite the influx of development, Montreal remains relatively affordable. The average price of a home reached C$341,495 in July compared with C$609,236 in Toronto and C$866,772 in Vancouver, according to CREA.

“Montreal is much more affordable than any other major city in the country,” says Sacha Brosseau of Sotheby’s. “And low interest rates on mortgages make it even more attractive.”

Buying guide

● Montreal’s population is about 1.6m

● French is the city’s official language but English is widely spoken

● Montreal winters are cold with daytime temperatures averaging -4C. Summer temperatures hover at about 25C

What you can buy for . . . 

$750,000 A three-bedroom apartment in a downtown condominium

$2m A five-bedroom penthouse in a new development with a rooftop pool

$3.5m A four-bedroom house in the suburb of Westmount with a garden

For more properties, please visit ftpropertylistings.com

Photograph: Getty Images; Alamy