Understanding Real Estate Cycles in Quebec

The real estate market evolves in cycles, alternating between periods of expansion and contraction. In Quebec, CMHC regularly publishes market analyses (Housing Market Outlook) to help identify the cycle phase in each region. Understanding these cycles allows mortgage brokers to better anticipate price trends, adapt financing recommendations, and position clients as strategic buyers or sellers. The Quebec market has the distinction of being less volatile than Toronto or Vancouver, thanks to a more diversified economy and lower exposure to foreign speculation.

The Four Phases of the Real Estate Cycle

1. Phase 1: Expansion: The market enters expansion when economic conditions are favourable: low or declining interest rates, growing employment, strong immigration, and high consumer confidence. Prices rise steadily, sales increase, property inventory declines, and days on market shorten. Housing starts increase to meet demand. In Quebec, the 2015-2022 period was characterized by sustained expansion, with annual price increases of 5% to 25% depending on the region.
2. Phase 2: Peak: The peak phase is characterized by market overheating. Prices reach record levels, bidding wars become frequent (sometimes 20 to 50 offers per property), and affordability deteriorates rapidly. Construction is at its maximum. The Bank of Canada may begin raising rates to slow the economy. In Montreal, the peak was reached in early 2022, with properties systematically selling above asking price.
3. Phase 3: Contraction: Contraction generally follows rate hikes. Sales decline, inventory rises, bidding wars disappear, and prices begin to correct. Buyers regain negotiating power. Days on market increase. In Quebec, the 2022-2023 contraction was moderate compared to Ontario, with price declines of 5% to 10% in most markets.
4. Phase 4: Trough: The trough represents the cycle's lowest point. Prices stabilize, transactions are at a minimum, and the market awaits a recovery catalyst (rate cuts, improved employment). This is often the best time to buy, as negotiating conditions are favourable and rates begin to fall.

Key Indicators to Monitor

• Housing starts (CMHC): leading indicator of builder confidence and future housing supply. Rising starts generally precede a supply increase 12 to 24 months later.
• MLS sales (Centris in Quebec): measure of actual transaction activity. Data is published monthly by APCIQ (Association professionnelle des courtiers immobiliers du Québec).
• Listings-to-sales ratio: the most reliable indicator of market balance. Below 15% = seller's market (upward price pressure). 15-20% = balanced. Above 20% = buyer's market (downward price pressure).
• Median price: the median price trend (rather than average) gives a more accurate picture of value changes, as it is less influenced by exceptional properties.
• Days on market: average number of days between listing and sale. Short days indicate strong demand. In Quebec, this ranges from 20-30 days in a seller's market to 90-120 days in a buyer's market.

Regional Particularities in Quebec

Quebec is not a monolithic market. Montreal and its suburbs account for the majority of transactions and are the most cycle-sensitive. Quebec City offers a more stable market with moderate prices. Gatineau benefits from Ottawa proximity and the fédéral public service market. Sherbrooke and Trois-Rivieres saw significant increases since 2020, fuelled by remote work and urban exodus. Remote regions (Abitibi, Saguenay, Lower Saint-Lawrence) have their own dynamics, often lagging behind major centres.

The Mortgage Broker's Role Across the Cycle

A savvy broker adapts recommendations based on the cycle phase, positioning themselves as a strategic advisor. During expansion, advise solid pre-approvals with rate holds, minimal offer conditions, and potentially shorter terms for renewal flexibility. At the peak, alert to overpaying risks and recommend caution. During contraction, counsel patience, higher down payments, and fixed terms for security. At the trough, identify buying opportunities and advise aggressive positioning to benefit from favourable conditions.