Quebec’s Housing Price Surge: Blame the Inventory Shortage, Not Brokers, Says QPAREB

The escalating property prices across Quebec have become a pressing concern, often leading to public debate and, at times, pointing fingers at real estate brokers. However, a significant new report from The Quebec Professional Association of Real Estate Brokers (QPAREB) offers a different perspective. The association firmly asserts that the primary driver behind the rapid increase in housing costs is a critical lack of available housing inventory, rather than the actions of individual brokers.

QPAREB’s comprehensive analysis identifies a confluence of factors, many exacerbated by the global pandemic, that together created what they describe as a “perfect storm.” This unprecedented situation saw an unanticipated surge in demand colliding with an already insufficient supply of housing units, pushing prices to historic highs in the Quebec real estate market.

The Underlying Issue: A Deep-Rooted Supply Deficit

“The brief we submitted to the Ministre des Finances contains a thorough and rigorous analysis that clearly shows that price increases are due to the insufficient number of properties put up for sale,” states Denis Joanis, President and CEO of QPAREB. He emphasizes that this challenging situation was not a sudden occurrence but rather a trend that began to manifest even before the pandemic took hold, not just in Quebec but across Canada. In Quebec alone, QPAREB estimates the housing supply deficit to be over 40,000 units. This alarming figure underscores the severity of the challenge facing the province’s housing market.

Charles Brant, Director of QPAREB’s Market Analysis Department, sheds further light on the long-standing nature of this imbalance. He points out that despite more than two decades of significant and sustained growth in housing demand, incentives for single-family residential construction have remained notably weak. This persistent failure to adequately boost supply in line with demand has created a structural problem. Brant criticizes governmental measures over the past decade, noting, “The measures taken by governments over the last decade to avoid overheating and household over-indebtedness have focused more on controlling demand than on encouraging the construction of new units to increase supply.” This approach, while perhaps well-intentioned to stabilize the economy, inadvertently contributed to the burgeoning housing supply crisis by neglecting the fundamental need for more homes.

Real Estate Brokers: Navigating a Turbulent Market

Amidst the public discourse, QPAREB’s brief also directly addresses the perception that real estate brokers are to blame for instances of overbidding on houses. The association argues that brokers are facilitators in a market driven by supply and demand, not instigators of price hikes.

Denis Joanis articulates the immense pressures faced by brokers, especially during the pandemic. “Like so many other professionals, real estate brokers have had to deal with the effects of the pandemic in their daily work: health constraints, sellers’ apprehensions as well as the frenzy and emotions of their buying clients,” he explains. He highlights the extraordinary demands placed on brokers, who had to demonstrate “initiative, resourcefulness and empathy” while managing an “incredible workload” to ensure the safety and satisfaction of all parties involved.

Crucially, Joanis reminds the public of a fundamental aspect of a broker’s role: “It is also important to remember that brokers have an obligation to obtain the best possible outcome for the clients they serve. It’s normal for a seller to take steps that will maximize the price and terms of the sale.” In a highly competitive market with limited inventory, multiple offers and bidding wars naturally arise. Brokers, acting in their clients’ best interests, are obligated to present all offers and advise on strategies to achieve the best sale price or purchase terms. This professional duty, QPAREB contends, is a direct consequence of market dynamics, not a cause of inflated prices.

The Pandemic’s Multifaceted Contribution to Market Surge

QPAREB’s brief meticulously examines several pandemic-related factors that significantly contributed to the unprecedented rise in the Quebec real estate market, creating a perfect storm for price acceleration.

Economic Stability Amidst Crisis for Many

Paradoxically, while the pandemic caused widespread economic disruption, a relatively large segment of the labour market did not experience income disruption. The report points out that almost 80 percent of the jobs lost since February 2020 were concentrated in the most precarious occupations. This distribution meant that a significant portion of the workforce, particularly those in stable, higher-income positions, maintained their financial standing. This economic resilience among many households provided a strong foundation for continued housing demand.

Increased Disposable Income and Household Wealth

Government intervention played a crucial role. Measures designed to assist businesses and households through the crisis effectively increased disposable income for many. Coupled with reduced spending opportunities during lockdowns (e.g., travel, dining out), this led to an accumulation of savings. The association notes that this wasn’t unique to Quebec or Canada; overall household wealth increased globally, encouraging activity in the resale market as more individuals found themselves in a stronger financial position to invest in property.

Historically Low Interest Rates

Undoubtedly, rock-bottom interest rates were a major catalyst. Maintained at historically low levels by central banks worldwide to stimulate economies, these rates significantly reduced the cost of borrowing. This made homeownership more accessible and attractive, even as prices climbed. The lower monthly mortgage payments enabled more prospective buyers to enter the market or qualify for larger loans, directly contributing to the upward pressure of demand on an already constrained supply.

The “Home as Sanctuary” Phenomenon: Shifting Preferences and Teleworking

The prolonged lockdowns and the rapid acceleration of teleworking profoundly altered housing preferences. The pandemic forced many Quebec households to reassess their living spaces and prioritize comfort, functionality, and space. The home transformed into a multi-purpose hub – an office, a school, a gym, and a sanctuary. Consequently, those who were not yet homeowners were motivated to become owners, seeking stability and control over their environment. Many experienced buyers, on the other hand, competed fiercely for spacious single-family homes, often with dedicated office spaces, larger yards, or more rural settings. This shift created intense demand for specific property types.

This preference shift also fueled a surge in second home purchases. The report highlights a staggering 62 percent increase in the number of buyers from the Montreal area who purchased a second home in regions such as Estrie, Brome-Missisquoi, Laurentides, and Lanaudière. This trend further intensified demand in recreational and semi-rural markets, drawing inventory away from primary residential needs.

Supply-Side Aggravating Factors

Beyond demand, the pandemic also directly impacted the supply side, exacerbating the existing shortage:

Construction Delays and Costs: The pandemic introduced unprecedented challenges to the construction sector, including labour shortages, supply chain disruptions for materials, and significant increases in material costs. These issues led to project delays and cancellations, severely limiting the supply of new properties entering the market.
Seniors Postponing Moves: Fears related to COVID-19 outbreaks in communal living facilities led many older individuals to postpone their plans of moving to retirement homes or smaller dwellings. This kept larger family homes off the market, further restricting available inventory.
Seller Apprehension and Market Withdrawal: During the initial lockdown phases, many potential sellers postponed their plans to list their homes. Others even withdrew their properties from the market entirely due to fears of possible contamination from showings or general uncertainty about the future. This collective hesitation drastically reduced the pool of available homes for sale.

Unforeseen Social Impact: Relationship Strain and Housing Demand

The report also notes a more somber contributing factor: “The stress, fatigue and anxiety created by the extreme lockdown measures led to the breakup of many couples, resulting in one spouse seeking a new home.” While a difficult social consequence, this phenomenon undeniably added unforeseen pressure to the housing market, as newly separated individuals required new, separate living arrangements.

Conclusion: A Call for Strategic Solutions to Quebec’s Housing Crisis

In conclusion, QPAREB’s comprehensive report provides crucial insights into the complex dynamics driving Quebec’s soaring property prices. It unequivocally reframes the narrative, shifting the focus from the actions of real estate brokers to systemic market imbalances, primarily a severe and persistent lack of housing inventory. The pandemic, while not the root cause, acted as a powerful accelerant, creating a perfect storm of heightened demand fueled by economic stability and low interest rates, alongside significant impediments to supply.

The challenge facing Quebec is multifaceted, requiring a strategic and coordinated response. Addressing the housing shortage demands a renewed focus on increasing residential construction, potentially through more supportive government policies that incentivize building rather than solely controlling demand. Understanding these intricate factors is paramount for policymakers, industry stakeholders, and the public alike, as Quebec navigates its ongoing housing crisis. Only through targeted efforts to boost supply can the province hope to achieve a more balanced and affordable real estate market for its citizens.