Quebec: How Long Will the Real Estate Market Hold Up?

Quebec housing starts were surprisingly strong through the end of 2024 and in January 2025. Once again, the rental housing segment was responsible for most of this growth (graph 3). Municipalities across Quebec have adopted a variety of measures to kickstart new housing construction. Some cities, like Drummondville and Mont-Laurier, have offered property tax credits. Other places, like Fermont, are promoting prefabricated homes as a solution. These measures seem to help offset the high costs of financing and construction, which had previously deterred builders. Efforts like these to spur residential construction are bearing fruit and will continue to support housing starts in 2025. 

Cities have also been granted “superpowers” to circumvent their own zoning and urban planning rules. This change seems to be responsible for the burst in new housing projects we’ve seen since early 2024. In Montreal, for example, a number of real estate projects have benefitted from fast-tracked approval. This special law is in effect until February 2027, and we therefore expect real estate projects to climb over the next few years (graph 4). That being said, housing starts still face several headwinds, including a lack of vacant land, the skilled worker shortage in construction and some zoning restrictions that are still in effect. And in some cities that have experienced rapid population growth, water and sewer infrastructures have been strained, forcing those cities to impose moratoriums on new construction. 

In addition to the measures above, construction costs are high but stabilizing, which should help builders better plan their future projects (graph 5). Lower interest rates should also help encourage new real estate projects. The tariffs recently imposed by the United States could, however, change our forecasts. Some materials, including wood products, metals and paint are sourced partly from the United States. Builders could wind up paying more because of this trade war. Even so, we don’t expect construction costs to soar like they did during the pandemic. The tariffs only affect products from the United States, so inflation shouldn’t be as severe as it was in 2021 and 2022, when global supply chains were disrupted. 

In 2024, rental vacancy rates rose across Quebec. This was good news for this market segment, and the increase could impact residential construction in cities and towns. All the same, vacancy rates throughout the province remained below 3%, the point at which rental markets are considered balanced (graph 6). Many units are being built and a return to balance is foreseeable, which should help rents grow at a pace more in line with the historical average. However, finding that balance will take some time, as evidenced by the 2025 recommended rent increase from the Tribunal administratif du logement (TAL), Quebec’s residential tenancy tribunal. The 5.9% average recommended increase means that rents should soar once again in Quebec in 2025 (graph 7).

Vacancy rates also differ widely depending on the building’s construction year. For example, in the Montreal CMA, the average vacancy rate was 2.1% in 2024—but for homes built after 2015, the rate was higher, at 3.8%. While construction has already begun for most of the rental housing starts expected in major cities this year, this weaker demand for new rental units does suggest that construction could slow in the next few years. Population growth seems to have started cooling External link., which should also lead to softer demand for rental apartments starting in 2025. Tighter immigration controls are another reason that real estate projects in major cities could slow, as new units are already being left vacant. We therefore expect the rental market to return to some form of balance in 2026, which should ease upward pressure on rents. 

Existing home sales rose in 2024, largely due to lower mortgage rates. This trend should continue in 2025 and 2026. As in the rest of Canada, the modest improvement in affordability was enough to convince some potential buyers to move off the sidelines. There is still some lingering pent-up demand, which should give sales another boost over the next few months. Quebec’s housing market remains more affordable than elsewhere in the country, particularly when compared to Ontario and British Columbia. That’s one reason the province’s existing home sales outperformed theirs in 2024, and we should see similar gains over the next two years (graph 8). In addition to lower mortgage rates, the relaxed mortgage insurance rules should also stimulate demand by helping a larger number of people afford homes. 

But still, prices are being pushed to new heights when demand outstrips supply. This is the case in the Quebec CMA, where active listings hit a new low in January 2025 and the sales-to-new-listings ratio stayed in seller’s market territory (graph 9). Bidding wars even seem to be cropping up for some homes in the area. Elsewhere in the province, even though listings have hit their 10-year average, sales are still well above their own average (graph 10). This market tension is expected to push prices higher in 2025, as it did across Quebec last year (graph 11). The slim gains in affordability found through lower interest rates and relaxed mortgage insurance rules will therefore be erased by rising prices External link..

Another aspect of the existing home market is renovation. Renovations should remain an appealing choice in 2025, given that it’s often more affordable than moving. In a survey External link. conducted by RenoAssistance and the Association des professionnels de la construction et de l’habitation du Québec (APCHQ), 68% of the owners surveyed would rather renovate to meet their needs than buy a new home. With home prices expected to rise, this trend should hold over the next year.

It’s now clear that Quebec’s real estate market did well in 2024. Its market composition and better affordability helped the province outperform the rest of the country. While some market headwinds persist, activity is still robust for now. Housing construction, especially of rental units, is expected to continue in 2025, although softer demand should eventually impact builder momentum. For existing home sales, lower interest rates should help potential homebuyers finally make their move.

That said, a trade war has begun, which could change our real estate market forecasts. Depending on how long the tariffs are imposed, we could see employment waver, in addition to business and consumer confidence. This is especially likely in areas that are heavily exposed to trade with the United States. Household finances could deteriorate, making individuals less likely to purchase a home. Construction costs should also rise due to tariffs on US materials. However, a more dovish response from the Bank of Canada at this point could offset some of the negative effects on real estate. Depending on how different regions are affected by the trade war, we may see very uneven movement by the real estate market. There is also uncertainty about Quebec’s population growth in the coming years. If the new federal and provincial targets are respected, the population could drop, which would significantly affect housing demand, especially on the rental market. Overall, outlooks for the real estate market—and the economy as a whole—will likely be quite uncertain over the coming year.