Québec City Mortgage Rates.

Similar to many housing markets across the province, Quebec City’s housing market has become a seller’s market. The market for buyers is more competitive because the number of listed properties has fallen by 49% in the 1st quarter of 2021 when compared to 2020, while sales have increased by 13%. The average home on the market in Quebec City took 87 days to sell in the 1st quarter of 2021, which is 40 days less than during the 1st quarter of 2020. This activity has led to prices rising, with the median single family home price in the 1st quarter of 2021 being up 15% to $300,000, while the median condo price is up 4% to $200,000, and the median plex price is up 10% to $350,000.

Although single family homes rose the most in price, condos saw the fastest sales growth, which was up 61% in the 1st quarter of 2021. The condo market was much more active because there was less inventory of single family homes to purchase, which caused many first time home buyers to purchase a condo instead. If the number of single family homes on the market recovers, it's likely we see more people purchasing a single family home instead of a condo.

New housing construction in Quebec City in 2021 has been primarily for rental homes, with only 31% of housing starts being for homeowners, while 69% are for homes that will become rentals, According to the Canadian Mortgage and Housing Corporation, all types of housing starts are up year-to-date, with apartments being the most built:

Part of the reason for apartment construction continuing to be strong is the large amount of sales volume we have seen for apartments, along with apartments being more affordable for home buyers and renters. As more apartments do get built, it will add to the supply in the region, which should make the market for purchasing a condo much less competitive for home buyers.

Homebuyers in Quebec City will owe land transfer taxes on their home purchase, which will be taxed at the following marginal rates:

Including other home closing costs such as lawyer & legal fees, property appraisal costs, a home inspection, and Title Insurance, you can expect to pay ~between 2% and 3% of your purchase price in total closing costs. Since these expenses can be thousands of dollars, you should budget for them when getting a mortgage so that you have enough funds for your down payment and to close on your home.

Quebec City first time home buyers may be eligible for two programs that are aimed at helping first time buyers purchase a home:

1. Quebec’s First Time Home Buyer Tax Credit- This program provides a maximum amount of $750 in a tax credit to help first time buyers purchase a home.
2. Quebec City’s Family Access Program- Families meeting income requirements are eligible to receive up to a 5% interest-free loan to use when purchasing a home.

Depending on your eligibility for both, these programs may make it a little easier to purchase a home, however having a large down payment and stable income will still be the most important factor in affording a home.

The vacancy rate in Quebec City increased slightly from 2.4% in 2019 to 2.7% in 2020. At the same time, the average apartment rent in the city went from $837 in 2019 to $874 in 2020, up 4.7% year-over-year. With a low vacancy rate and a housing market that is 40% renters, finding a home to rent can be hard, especially with a low turnover of rental homes in the city. This is something to consider when you are deciding whether to rent or buy a home, along with other factors such as how long you plan on staying in the home and how large of a mortgage you can afford.

Quebec City is one of the most affordable major cities in Canada, which makes saving up for a downpayment and paying a large mortgage amount much easier to do with less of your income going to basic living expenses. The chart below shows the cost of living per month in Quebec City compares to other major cities throughout Canada for a 3-person family with a young child:

The low cost of living in Quebec City also means lower incomes and higher income tax rates than other major cities in Canada. The median after-tax income per month in Quebec City is ~$5550, which is lower than more expensive cities such as Toronto at ~$6500, Montreal at ~$5600, and Vancouver at ~$6700.

Originally settled in 1535, Quebec City is one of the oldest cities in North America and is the capital city for the province of Quebec. Quebec City’s population is now over 830,000 people and saw stable growth in 2020 with the total population up 0.9%. The biggest driver of this population growth was international migration, which brought ~4500 more people to the city. Quebec City also saw 1500 more people come to the city from within the province of Quebec than leave it. As the population continues to grow from both these sources of migration, the demand to purchase a home will continue to rise.

Quebec City’s population has continued to get much older, with 17.5% of residents being over the age of 65 as of 2016, up from 14.4% of people in 2006. If this trend of an aging population continues, the demand for condominiums should continue to benefit the most, as many older people may look to downsize and live in cheaper homes. This may also make it less competitive over time for younger home buyers to purchase single family homes as more of the population downsizes. With apartment construction continuing to make up the largest portion of residential construction, Quebec City looks to be in good shape to meet the future demand for condos.

With a very low unemployment rate of 4.9%, the economy in Quebec City has managed through the COVID-19 pandemic well. The reason for such a resilient economy is because of Quebec City's large public sector presence, with the provincial government employing tens of thousands of workers alone. The city has continued to invest to accommodate the growing population and economy, with large projects such as a $7 billion tunnel between Quebec City and Levis. Other industries in the city include financial services, manufacturing, transportation, and tourism. Quebec City also has many large corporations in the region, including IA Financial, La Capitale Insurance, Ubisoft, and Rothmans Benson & Hedges. The resilience of Quebec City’s economy may continue to attract more people to the area, which would have a positive impact on housing demand and the overall economy.

With very high provincial income tax rates in Quebec, those looking to live in Quebec City will have more of their income earned go towards taxes. This means that even with a lower cost of living, the standard of living you will have in Quebec City will not be much higher than in a higher cost city, because you will have less after-tax income to start with.

The property tax rate in Quebec Cityin 2020 was 1.0104% of the appraised value of a home. This was similar to other large cities in Canada such as Hamilton, Ottawa, London, and Edmonton:

The more you pay in property taxes, the less you will be able to put towards a monthly mortgage payment. Your property tax bill is another housing-related expense and the larger it is, the less room in your overall budget you will have to cover monthly mortgage principal and interest payments. Most lenders in Quebec City and across the province will have you pay your property tax bill monthly along with your mortgage.