Impact of Falling Residential Market Prices on Quebec’s Household Financial Situation

Although a correction by Quebec home prices seems unlikely in the near future, the consequences of such a shock for households’ financial situation merit examination. We tested two fictional hypotheses using simulations: a 15% decline in the average home price, and a 30% decline, both over two years. About 15% to 20% of homeowners would find themselves in a discomfort zone, or even in a critical zone that could bring on financial difficulties. Of these, only households that would be forced to sell their homes during the downturn period would be affected. The situation would be more problematic if the home sold for less than the balance on the mortgage. Thankfully, there is no decrease on the horizon: Quebec’s residential real estate market is strengthening after a lull, there is little risk of overvaluation, and the economic situation remains good. Also, the restrictive measures instituted to curb speculation in Vancouver and Toronto are not needed in Quebec. Price growth remains moderate and the market is not overheating. Although unlikely, what would happen if prices collapsed? This is a risk to consider.