Buying a Condo in Montreal
By the end of 2015, about 8000 condominium units had broken ground in downtown Montreal alone! It seems that more and more people are interested in living downtown and owning their own piece of real estate. So why has the idea of buying a condo in Montreal become such a phenomenon? The answer might be found in the very idea of owning an asset in the heart of a vibrant city. It is this concept that addresses people’s needs so perfectly. Living in downtown Montreal is perfect for those who work or study in the vicinity, for those who despise long commutes, for those who love the hustle and bustle of the city’s core, not to mention the beautiful architecture and surrounding attractions. If you have ever spent time in Montreal, you know how enjoyable it can be to live right in the centre of everything.
Assess your needs
Before deciding on buying a condo in Montreal, you must first analyze your current situation. If you live in the suburbs, your living space may be larger but if suburban life is too quiet and too far for your fast-pace needs, the city may be a better option for you as well as a better long-term investment.
Or, perhaps you’re a renter in the city and long for a place of your own, close to the city life but away from landlords, rents, leases and all the other headaches. Owning your own place may be the answer and if you weigh out the costs. With today’s interest rates, you may be better off owning your own property.
Fortunately, Montreal is booming with new and diverse developments right in town, giving you the opportunity to buy your own condo in the heart of Montreal. If you are hesitating between buying or renting in the city, or if you are divided between suburb and city life, you’ll find all the information you will need to make the decision that is right for you within this article.
Your Own Place
Purchasing your own property is one those defining moments in life, right after buying your first car or attaining your bachelor’s degree. You will no longer need to worry about renewing a lease, rent increases, or waiting for your landlord to finally fix those leaky pipes. Being an owner gives you not only a sense of independence, but also the authority and ability to modify and improve your asset! You’re in charge, so renovations and other important decisions are made when it’s convenient for you. Any improvement you make to your own condo is an investment in your asset, rather than investing your money or time, or sometimes both, to help some else’s.
When you buy a condo in Montreal, you have the freedom to modify your new space to reflect your personality. Renting someone else’s property means adhering to their rules, which could mean no new pictures on the wall, no electric stove, or no pets. However, when you are the owner, “your house – your rules.” Nails, screws, pets and paint colors are not subject to inspection by anyone when you are the owner of your property.
Rent or Mortgage?
Rent is very straightforward. One monthly payment is made to your landlord’s pocket (usually, a pocket with a growing hunger) while a mortgage is a monthly payment towards the condo purchase. In time, you will own your condo entirely (or a good portion of it) and can hopefully expect an increase in value when comparing it to the current market value. Moreover, while Montreal rents are becoming increasingly expensive, mortgage interest rates have just seen a record low (although this trend is going to be reversed quite soon).
As a mortgage is, essentially, a debt, its value is going to decrease over time, as inflation will depreciate your real monthly payments. As all other costs go up, it is going to represent a smaller portion of your total monthly expenses. By the time you’re on your last payments, it could be assumed that your mortgage payments will be a smaller burden on your income than they are now. On the other hand, rent would be practically pegged to the inflation rate. It is going to increase each time the rent market, energy prices, fees, taxes or even grocery prices appreciate.
You may be better off paying a fixed amount rather than rent that can increase each year with the rate of inflation. Keep in mind that while rent is just a repetitive purchase, mortgage simply means you are buying in payments. However, as an owner you will be responsible for payments other than just your mortgage. First and foremost, you are required to make a down payment, which can be anywhere from 5-20% of the purchase price. Your mortgage is then calculated based on the remaining amount that you owe. As a homeowner, you are also obliged to pay property taxes (municipality and school taxes), which are calculated based on the assessed value of your property. You can either incorporate these costs into your mortgage payment or pay them as they become due every year. Another cost a homeowner will incur is a one-time welcome tax, which is a fee for the transfer of land. Click here for more information on the welcome tax and to calculate how much your are likely to pay. Condo fees vary depending where you purchase and cover all the common areas of the building.
You may be able to take advantage of the home ownership program available to Montrealers, if you meet certain requirements. You may be able to benefit from financial assistance, a refund of the welcome tax, renovation credits and more. You can look here for all the details of this program.
There are definitely many costs to consider when deciding between buying a condo in Montreal versus renting. In the long run, if you have the money for the initial down payment and can take advantage of the benefits offered by the city, buying may be the way to go as you’re gaining a real estate asset, which is one of the most valuable assets to have.
So, why a condo in the city?
One of the most common deciding factors when buying a condo in Montreal is commute. For many, living in close proximity to work is ideal especially if they don’t own a vehicle. The downtown core provides easy access to places like stores, restaurants, parks, commercial buildings etc. without the long commute by train, metro or bus. Many locations are within walking distance or short ride away via public transportation. Most Montrealers enjoy the convenience of getting around by bicycle as most downtown streets have bike paths.
Some of your friends may have bought a home on the South Shore or in the West Island. Commuting to the downtown core takes roughly 30 minutes from the suburbs in each direction. This results in a full hour of your day spent on the road, which increase easily depending on the amount of traffic encountered along the route. Now let’s be modest and assume they only spend 10 more minutes finding a parking spot or waiting for the bus. This easily accumulates to almost 6 hours a week, or one whole day each month spent on commuting!
Owning a condo means you can use these wasted hours commuting on something a lot more productive. Bike to your workplace and use the extra 30 minutes every day to spend more time with your family, hanging out with friends, exercising at the gym or relaxing at the park! Living downtown gives you more time for you. Not only do you save time, but you can save money, too. You’re essentially saving on public transportation, gas, parking, and perhaps a car payment. With this money, you could easily take your significant other for dinner and a movie, which would be no problem considering that it’s all within walking distance!
Buying a condo in Montreal is a clever way to buy a shared-spot in a location you could normally not afford buying on your own. This way you could have the convenience and luxury of living downtown, at a fraction of the price you would pay for a full remote home. These prime locations would enable you to lead an urban, connected, and independent lifestyle, and will leave you with the time and money to make the most of it.
Of course, Montreal is an amalgamation of different neighbourhoods, local centres, and cultures. Buying a condo in Montreal means you are closer to the centre of every neighbourhood, and will guarantee proximity to a bus or a metro station that will easily connect you with the other parts of the city. Generally speaking, a condo within the island of Montreal is a great starting point to get the hottest spot of every neighbourhood. With all this information, how could anyone not buy a condo in the city?
Is Montreal a good place to invest?
There’s been a lot of talk about the local real estate markets in Vancouver and Toronto and how they are more promising than Montreal. While Montreal’s modest but steady increase in house prices is generally a reflection of the city’s cost of living, other regions in the nation are accelerating at a pace that could suggest a real estate bubble. Other areas, such as Regina and Victoria, are actually in decline. Look at the housing prices across Canada and observe what a great deal you could be getting in Montreal, seeing as it is on the lower end of the spectrum.
However, Montreal keeps an advantage over the cheaper markets. Compared to other regions, Montreal is keeping its steady increase, while the others are less consistent.
Montreal is a stable market that is only going to experience further increase thanks to Montrealers’ income, the city’s development, and positive net immigration.
If you are looking to buy a condo in Montreal as an investment, think of the potential of buying a place to rent it out. Quebecers are well known for their traditional propensity to rent rather than buy, and with over 350,000 students living in the city, renting is a hot market that could enable you to enjoy a steady stream of revenue. Generally speaking, given that you rent your condo out at a higher price than the cost of your mortgage, you only need the rest to cover the down payment in order to break-even.
Let’s take the example of a 2-bedroom condo in downtown that costs $290,000. A local Canadian bank offers a 2.49% mortgage after a 5% down payment of $15,000. The monthly payments would $1,230 every month. An equivalent condo would rent anywhere from $1,700-$2,100 per month. That’s a net return of $470-$870 each month. Note that this calculation includes your mortgage payment only, and as an owner you are responsible for other fees such as taxes and condo fees. Therefore, your actual net return will be less.
This is also how much you would save each month on your own rent, if you decide to stay in the condo yourself. This is a considerable sum to add to your own household each and every month, and it allows for not only extra revenue, but extra security.
And Why Now?
As the city is rapidly growing, it might be a good investment to grab some square footage now, as prices around town are expected to go up. While prices in other cities in Canada rise and fall rapidly due to tidal real-estate bubbles, Montreal remains safely stable, but far from stagnant. And although you are bidding on an accelerating trend, your condo purchase will be done with little effort compared to your fellow homebuyers across Canada. A Torontonian and a Vancouverite would have to say goodbye to $609,236 and $866,772, respectively, according to CMHC; to buy a condo in Montreal you’re looking at an average price of $341,495. Mortgage rates are already on the rise: CMHC expects current 5-year mortgage to rise from 5.1 to 6.5 during the coming year, and every change means higher monthly costs.
If you want to live close-by, have your own place, and own an asset that would serve as both a security net and a good investment, a condo could be a great solution for your needs. It is not as big an investment as it would be in other cities across the country, and it would allow you to live the way you’ve always wanted to. Take advantage of the low mortgage rates, the abundance of opportunities and Montreal’s growth potential! The sooner you buy your Montreal condo, the sooner you can call a place your own.