The president of the Association des Professionnels de la Construction et de l’Habitation du Québec Montérégie-Suroît (APCHQ-Montérégie-Suroît), Jean St-Pierre, claims that the construction sector is in an unusual situation.
Mr. St-Pierre talks about real madness when he talks about construction right now. The high demand for materials, partly explains the rise in prices according to him. However, he confirms that the demand is real.
Owner of an excavation company, Mr. St-Pierre points out that his sector of activity is also experiencing a significant increase. “Usually in the winter, I only have one excavator running, he says. Right now, I have three. We are already digging a lot. Since there aren’t that many houses for sale on the market, people are building themselves.”
The law of the strongest
The demand for building materials is so high that some contractors have decided to store materials. “No one was doing this before. There are big customers who demand that the suppliers keep the wood for them. As a result, the smaller ones cannot have the necessary materials.”
Interest rate
Since interest rates are low, demand for homes is on the rise. Mr. St-Pierre points out that interest rates have fallen by 7% in 20 years, so many want to take advantage of it.
“In 2000, the regular rate was 8.75%. Currently, it is less than 2%. This is an incentive for buyers. But, right now, baby boomers don’t want to sell to live in a residence. This means that there are far fewer houses available. Therefore, people are turning to construction.”
Mr. St-Pierre is not hiding the fact that, in the coming years, many new buyers may have to hand over their property to their banking institution. “When the time will come to renew a mortgage for $ 400,000 and the interest rate is 5%, people won’t be able to absorb it.”
A simple calculation on a mortgage site shows that the monthly payment for a home of $ 400,000 is $ 1,704.81 at a rate of 1.8% and that the same payment increases to $ 2,398.54 at an interest rate of 5%.
The president of APCHQ confirms that materials will be lacking in the coming months. One of the options, he said, would be to allow more logging. “The scarcity of materials explains the rise in prices. There is a way to increase logging while respecting the environment.”
Hard to believe, but now is not the best time to buy a property let alone sell the one you own.
“If anyone wants to sell, obviously they’re going to make a huge profit. The problem is, this person is going to pay dearly for their next property. There are homes for sale posted at $ 400,000 that are currently finding buyers over $ 475,000. It is best to wait for the market to stabilize.”
5,000 new homes
Recently, the City of Salaberry-de-Valleyfield announced the construction of 5,000 new homes. For Mr. St-Pierre, this news is peculiar. “It’s a huge project. This will increase the population by 20%. This is good for construction, but it can also drive up the price of materials even more.”
