As published in the Tremblant Express, April 2022 edition
If only I had one! It would be so useful for answering most of the questions that buyers and sellers are asking themselves right now.
As a reminder, here are some of them: should I wait a little longer before selling? Should I buy now or wait? Is this a bubble? When will the price hikes stop?
In the March issue, we answered the two questions most often asked. They’re legitimate questions, but the answers are much less straightforward. In this April issue, we’ll look at the last two questions, namely: Is it a bubble? When will the price increases stop?
It is a very complex matter to determine if we’re in a bubble before it bursts. Let’s shed some light one thing: the rigidity of the process for getting a loan in Canada protects us from a bubble. You have to have a pretty solid financial situation to get financing.
A bubble is characterized by an inexplicable increase in prices. It goes without saying that there’s been an exceptional increase in demand and prices in the past two years for secondary residences, and Mont-Tremblant has been no exception.
The increase can be explained by numerous factors:
- the health crisis and the desire to flee the big urban centres where public health measures were harder to live with
- retirement dates being advanced
- new interest in teleworking, which lets people use their rural property more than two days a week (and even up to seven) by setting it up for full-time living
- savings created without commutes
- anticipation of purchasing projects
- increase in construction costs
- low mortgage interest rates
- exceptional stock market returns
- market equity between the Montreal and Ottawa real estate markets — the primary basins for Mont-Tremblant purchasers — and our local market
- the increase in rental revenues due to local travellers.
Are these factors sustainable? If all these reasons are only temporary, and all these components in making the decision to acquire a property disappear at the same time, there could be a return of the pendulum.
Happily, however, some of these factors appear to be lasting. The pandemic generated a keen interest in teleworking and in the resulting use of the secondary residence.
Something that refutes the bubble theory, in my opinion, is that this market evolution has been created by local buyers – the great majority of them from Montreal and Ottawa. No cascades of Chinese yuan, euros, or even American dollars or pounds sterling have been seen in the past two years.
Yes, Mont-Tremblant has had its share of foreign buyers. Year in year out, from 1995 to 2008, 20 per cent of purchasers had not earned their down payment in Canadian dollars.
I believe that this provides the market with some solidity. I sense that there will be a return of foreign buyers when the short-lived motivations generated by the pandemic have disappeared.
As I write these lines, the real estate market continues to climb. I believe, however, that what we’ll see next is a value plateau. The uncertainty that accompanies the war in Ukraine, the decrease in the stock market and the increase in mortgage rates will slow demand somewhat. The real estate market hates uncertainty.
On the other hand, to know if after this digression things will pick up…well, I’d really need a crystal ball.