Pros & Cons for US Citizen of buying luxury residential condo in Downtown Montreal

[ShyMan]

Hello Everyone,

I love downtown Montreal, especially since I can walk to many places of interests, like the art center, opera house, shopping and McGill University. I fell in love with Montreal on my first visit over a decade ago. Montreal's first-rate Hobbyland is simply icing on the cake.

With so much overbuilding (and the attended huge construction traffics) in Montreal in the last few years and many developments likely to hit the market pretty much the same time in less than two years, I'm thinking about buying a luxury residential condo in the heart of downtown as a residence (not necessarily as an investment). IMHO based on observing trends in NYC, SF and other metropolitan areas, where in a couple of years supplies of residential condominiums will far exceed demand when they all hit the markets, I think the condo market in Montreal will likely suffer the same fate, with current prices falling to 50 to 60 percent (which happened in San Francisco in the aftermath of the Great Recession).

I have no idea about real property ownership in Canada, in general, and in Montreal, in particular. I'd appreciate any insights you can provide on the pros and cons of owning real property in Montreal, such as property taxes (especially for a non-Canadian citizen; a Yankee like me), legal protections available to buyers against sellers (especially big developers) for construction problems and defects, costs of purchasing furniture, homeowners association dues and resolution mechanism for resolving disputes with neighbors.

Maybe it's best for me to stick to staying at hotels like Le Westin, Loews Hotel Vogue, Omni Hotel, Hyatt Regency, and Sofitel. (Maybe I'll stay at the Ritz Carlton if and when I win the lottery, big.)

Maybe it's wishful dreaming on my part; but, it would be nice to own a luxury condo in the heart of Montreal's downtown. Another wishful dream is to get a teaching job at McGill

Thank you in advance for sharing your insights.

 

[minutemenX]

Well, SF was crazy and still is. Can’t put it as an example. I doubt price in Montreal will go down more than 10-15%. The market in Montreal is not overheated. In comparison to Toronto and Vancouver Montreal condos are relatively cheap. Also as non-resident you can’t claim it as a primary dwelling and therefore have to pay taxes on profit when sell and it could be a lot.

 

[Valdo]

...they said that is a rip off because you have to pay maintenance fee. I don't know about the price in downtown Montreal, could be expensive.

Price per Square Meter to Buy Apartment (condo) in Montreal City Centre: $3,100 (USD) or $4,075 (CAD)

Price per Square Feet: $290 (USD) or $381 (CAD)

It's three times cheaper than in Boston. And maintenance fees are pretty reasonable. This is definitely not a ripoff.

 

[ShyMan]

I already own a house in the States -- when I first bought the house, which was brand new, I was "addicted" to getting my backyard to look great and focused my time and energies on my house for years. Now I couldn't care less for having a backyard; I too am single. My house is in a gated community so I've been paying HOA dues for landscaping in my front yard and the rest of the community, a private park and a community swimming pool.

I'm keeping my house.

i owned a few condos in the financial district where I worked (until I took time off to care for my now terminally ill mother). And I loved walking to work from my condo; the condo fees kept rising but so did the costs of public transportation and gasoline. But it was great to be able to get some extra sleep, instead of being stuck in rush hour traffic.

Montreal is such a walkable city; and it's safe! I don't intend to stay single forever and hope to start my own family. I just love Montréal even more because of it's European flare in a more humble Canadian manner. It's so much cleaner than Paris by any measure.

My vice is I have a sweet tooth for the finer things in life, especially when it comes to residences (a home with awesome views) and expensive German cars! Oh, great SP's

 

[blkone]

With all due respect, Non-Citizens should not be allowed to buy any of our residential property.

 

[ShyMan]

Non-Citizens should not be allowed to buy any of our residential property.

I appreciate your sentiments. But you'd be very shocked to find that many of the apartment and office towers and shoppping centers were financed and owned by "black gold" from the Middle East, particularly Saudi Arabia. I suspect monies from China, the Middle East, drug king pins from Mexico and the super wealthy in Russia have been a significant source of fundings that have been fueling the construction boom in Montreal, creating lots of jobs for local tradesmen, bankers, engineers, architects and lawyers in and around Montreal. But let's hope the local citizens get the last laughs when the market inevitably crashes, allowing local citizens to buy these real properties at reasonable affordable prices.

There are a sizable contingent of Canadians and French citizens who bought and own real properties in the States. Like it or not, globalization has brought many foreigners to Canada, which like the good old USA, was first populated by Europeans (e.g., folks from the U.K. and France and Italy).

In now simply trying to understand the pros and cons of home ownership in Montréal, for Canadian citizens as well as outsiders like me. If and when I do buy a home in Montréal, I intend to keep it as a residence, not as an investment, because maintenance fees and property taxes will far exceed any profits, if any, I ever hope to make. It's actually easier for me to make money, and lots of it, in the USA by investing in real estate. But I want to own a home in Montréal because that's what I want to do.

 

[jalimon]

interesting topic indeed. condo are bad investment, 70% of first time buyers resell at a loss so its good that is not what you are looking for. Myself i am waiting 2 -3 year then i will buy one so i can go back to live in the city sometimes, and then let my 2 kid live there once they hit college. I have already looked around griffintown area. I know a lot of asians and europeans have bought condos for their kids wich attend mcgill university. That is very good for montreal.

cheers,

 

[EagerBeaver]

Bikone,

If you want an introduction to the real world- I stayed at Le Seville Condos in downtown Montreal which they finished building in 2014. I was told by an owner the ownership of those condos is 100% foreign - half Chinese and half Middle Eastern. Most of the investors purchased condos for their kids who are foreign students attending college in Montreal. The large % of Chinese ownership makes sense as Le Seville abuts Chinatown II.

Who do you think is buying these condos? If the developers were limited to selling to locals they would all go bankrupt. As far as I can see the demand for this glut of condos downtown is coming from foreign money sending their kids to college in montreal and paying absurd dirt cheap tuition. Even McGill costs maybe 1/5 of tuition at a like institution in the USA. So the middle class foreigner sends his kids to get educated in Canada while the upper class Foreigner sends the kid to Yale and Harvard and similar in the USA. This is what is going on here.

I personally observed lots of college aged kids in the Le Seville's pools, all looked foreign to me. When those kiddies graduate they will rent this investment property out.

Welcome to the new Montreal which is a great melting pot- the fondue of humanity!

 

[EagerBeaver]

With the currency being so low, you will likely pick up some currency gain when you sell in a few years. Do Montreal condo associations allow them to be rented for short periods of time? You have a built-in airbnb market here on Merb.

AirBnB rules for any Montreal stay of 3 or more nights, and anyone who stays in a hotel for 3 plus nights is telling me he likes pissing his money away and it is one huge urine stream at that. The quality of housing you can get at lower prices than 4 star hotels in amazing. Right now in Montreal you pay 3 star prices for 4.5 star properties on AirBnB and you pay 4.5 star prices on 4 star hotels. That is the bottom line and I say this having stayed at 4 different AirBnB condos in the last 2 years, all new construction, 2 in Old Montreal, 1 in Griffintown 1 downtown. The guys who book hotels on 3 night plus stays are dinosaurs, at the very end, they have not adapted and will soon perish.

While many AirBnB condos have a 3 night minimum, once you stay there, respect the rules and are not a pig, owner will bend that rule.

A lot of condos don't allow short term rentals but it doesn't stop it from happening. This is discussed at length in AirBnB thread. No way to police it except to fine owners but it still happens. If you say you are friend of owner and he let you stay there for the weekend how can they prove otherwise? Answer: they can't.

 

[jalimon]

Who do you think is buying these condos? If the developers were limited to selling to locals they would all go bankrupt. As far as I can see the demand for this glut of condos downtown is coming from foreign money sending their kids to college in montreal and paying absurd dirt cheap tuition. Even McGill costs maybe 1/5 of tuition at a like institution in the USA. So the middle class foreigner sends his kids to get educated in Canada while the upper class Foreigner sends the kid to Yale and Harvard and similar in the USA. This is what is going on here.

EB according to latest stats from the Canada Mortgage and Housing Corp, the amount of foreign buyers represent only about 4% in Montreal. Of those 40% bought without the use of a mortgage and most are France and United States citizen. Developers still relie heavily on the local market. That said, Montreal is currently in buy mode for condos, as the supply is very high, price quite low and if you are american or european, canadian dollar very low.

And as you said, AirBnb does represent a nice alternative to recuperate a bit on the investment.

Cheers,

 

[EagerBeaver]

Those stats are for city wide housing. All I am interested in is who is buying the newer condos built since 2014. My info is it's mostly Chinese investors who figured out Montreal is way cheaper than Toronto and Vancouver. Also a lot of this development is near the Bell Center and it's not a convenient location for the local Montrealers. Or so I hear.

 

[jalimon]

No actually city wide the number is down to 1.3%. 4.9% is for downtown (and not 4 as I wrote). But that is 2015, all indicators show that this is changing, and fast.

It is well known that Canada was much less affected by the 2008 crisis because of our higher bank and mortgage rules, but we are far from perfect, and to those foreigners intested in flipping for a profit, you can read this:
http://www.theglobeandmail.com/real...s-favour-foreign-home-buyers/article31869946/

Cheers,

 

[EagerBeaver]

This thread reminds me that the last time I stayed in Le Centre Sheraton, this spring, I walked by the huge condo high rise they are building on Drummond near the Sheraton. They had dug down and excavated around 4-5 stories below the ground level for an underground parking garage. There was a big backhoe type vehicle at the very top of what looked like a makeshift road built of gravel which spiraled down 5 stories to the bottom of the excavated pit. That makeshift road was obviously used to drive the backhoe up and down from the bottom of the excavated pit.

I am not that knowledgeable about excavation activities in construction but to my naked eye that gravel road looked uneven and unstable. You could not pay me any amount of money to drive that backhoe up and down from the bottom of the pit. Also made me think of all the poor bastards who fell off the Empire State Building in NYC during its construction in around 14 months. I give these guys credit for assuming these tremendous risks.

 

[ShyMan]

I am not that knowledgeable about excavation activities in construction but to my naked eye that gravel road looked uneven and unstable. You could not pay me any amount of money to drive that backhoe up and down from the bottom of the pit. Also made me think of all the poor bastards who fell off the Empire State Building in NYC during its construction in around 14 months. I give these guys credit for assuming these tremendous risks.

Poor construction is a huge concern for me; especially having lived in high rise condos with construction defect problems.
There's a tower that went up in a matter of less than a year on Peel or Stanley by St. Catherine (near Harry Rosen); the driveway into the building is at a huge incline -- I think they need to install stairs for pedestrians to walk up the driveway. I watched the excavation work from the window of a Japanese restaurant across the street about 10 months ago; when I went back in late November this year, the building was almost half built. The building that's taking shape looks blend and nothing but a rectangular tall box.

When I first visited Montreal about 10 years ago, I was enthralled by the elegant office towers in downtown Montreal. I took so many photos. I love beautiful architecture. Now, what that new buildings that are sprouting up quickly lack elegance and identity.

I hope these new residential condominiums withstand the test of time. In any event, I think the locals will benefit in the long run, when there will inevitably be massive oversupply. Living in downtown has its charm but it's nice to be able to escape to a house in the suburb now and then to rejuvenate. I think locals will be able to buy second homes in downtown Montreal in a few years. Look at the well publicized new ghost towns full of empty brand new high rise condos in China and the empty huge mansions in London (owned by oil wealth in the Middle East Kingdoms). I hope these new condos in Montreal will eventually benefit the locals in terms of affordability.

Good point about AirBnB, EB. I'll always be a dinosoures -- I love staying at 4 and 5 stars hotels.

 

[minutemenX]

I stay in hotels when I am on business from my work, no options there. On private trips AirBnB is the way to go. Anybody from US who wants to buy property and live in Montreal needs to look at taxation issues. It is complicated, especially with new US government regulations that require US citizens to report anything you own and all bank accounts outside US that exceed $10K.

 

[EagerBeaver]

ShyMan,

To me the most interesting building in Montreal is also its tallest, 1000 de la Gauchietiere Ouest:

https://en.wikipedia.org/wiki/1000_de_La_Gauchetière

I have actually been inside the ice skating rink there.

Regarding new construction, my current condominium that I live in was brand new when I purchased it. Although new construction is the way to go, for investment (condos age rapidly depending on how well managed they are), there can be issues with new construction. My condo is a ground level ranch unit built on concrete slab. I had ceramic tiles installed in the kitchen, but the subcontractor who did the work did not install a geosynthetic liner over the slab to cushion the tiles from the settling of the concrete slab. As a result, I had cracking kitchen floor tiles for 2 years. I finally got tired of it (although a client of mine who is a tile installer installed all the replacement tiles for free), and instead I had him put in brand new porcelain tiles which look like a hardwood floor. Of course by then all the concrete settling was done, but nothing is going to cause these porcelain tiles to crack. They are really crack resistant - even if you drop an anvil on them, they probably will not crack.

I had one other significant issue. The water pipes are located in my attic crawlspace. Such construction probably would not be allowed in Montreal, but in southern New England where the winters are not as harsh they are allowed, if they are adequately wrapped with fiberglass insulation. Unfortunately, my condo's pipes were not adequately insulated, something I ironically did not discover until returning home from Montreal after spending a long President's Day weekend there. I went to jump in the shower and the water did not run out of the shower spigot. I knew immediately the pipes had froze. I turned up the thermostat to 80 degrees, and opened the hatch to the attic to allow the warm air to go up there. Within 2 hours the pipes thawed out and none cracked as they had just started to freeze. Apparently that weekend, two neighbors of mine had their water pipes crack. So the Condo Association hired an engineering consultant to assess the remedy and he advised the Condo Association to do 2 things: (1) install circulation pumps in the condo units which circulate the water 365/24/7; and (2) re-insulate the attic crawlspace pipes in the ranch units built on slab (water pipes are in the cellar in the Townhouse units). In the 12 years since then, I have never had the pipes freeze again. The downside is it costs me about an estimated 7 cents worth of electricity per day to have that pump running all the time. One plumbing/HVAC contractor I had over told me I can possibly get another one that only runs when the temperature dips below 40 degrees. That might be another possibility depending on the cost.

The only other issue we have had is parking. My complex has indoor garages and outdoor spaces. Some of the neighbors don't really know where to park their vehicles. I have my own garage and the space in front of it and adjacent to it, so in total 3 theoretical parking spaces. A lady living 3 units down parked her car in one of my spaces and was not moving it. Initially I had no idea whose car it was and after it was in the spot for 3 days I spoke to my immediate neighbor, a nice divorced woman who lives alone. She told me the lady that parked it there lived 3 units down. I went over to that lady's unit and told her I was getting ready to call the local police because I didn't even know whose car it was and suspected it was being used in the commission of a crime, was owned by someone who is dead or was abandoned. She kind of freaked out and moved the car and never parked in my area again.

 

[Vajatron]

I bought a pre-construction in downtown condo in 2012 (top of the market), and sold it a few months ago at a double-digit % loss (this includes the 5% commission I paid the realtor). My advice for people asking if they should buy a condo in Montreal is NO. A few things to be aware of:

1) Montreal (and Quebec in general) is a renter's culture, compared to many other cities where everyone aspires to be homeowners. As a result, there are far fewer buyers for properties in Montreal (either as primary residence or investment) than say in Toronto. You will likely have a tough time getting rid of it if you change your mind at a decent price.

2) My unit was supposed to be in a prestigious building, yet the quality of the finished product did not reflect that.

3) Too many rules with the condo board. Have to book the elevator way in advance for move-ins, or to accept large deliveries like furniture. Sometimes I had to leave a deposit for damages to the elevator/hallways. The concierge/doormen can make life very difficult for you.

4) The Canadian government is trying to cool down overheated markets like Toronto and Vancouver by changing mortgage rules. However most of these rules apply to all of Canada so it's going to impact non-overheated cities like Montreal (or anywhere else besides Vancouver and Toronto). So I think the market is very vulnerable right now.

5) Also if you plan on seeing escorts in your condo, having a doorman is a big pain in the ass. I had this one annoying doorman who would harass and interrogate ladies coming up to see me (like asking them for their name, what do they do, why they're here). It made some girls uncomfortable/embarrassed.

6) Condo fees + high property taxes + utilities + school taxes make carrying costs pretty high, so condos are pretty lousy investments. Also in Canada mortgages are not tax-deductible like in the U.S.

 

[EagerBeaver]

Vajatron,

Sorry to hear of your experience, which I am sure ShyMan will find helpful.

Yes, I get a tax deduction for my mortgage payments, the interest portion of it. I refinanced twice the last 6 years to take advantage of lower interest rates and what is nice is that when you refi your paying interest first and the deduction is bigger.

When you buy completely pre-construction (I only kind of did, because although my unit was not built, units identical/similar to mine had already been built, so I could see them), you are somewhat exposed to whether the developer keeps his promises or is full of shit.

Many years ago, I represented a client who invested approximately $120,000, which was his life savings, pre-construction, in a commercial real estate development. The developer was a complete blowhard and bullshitter and quite frankly just a swindler. The project was never developed- nothing was built. My client did not get his money back. We sued the developer. Shortly after we sued, the developer suddenly died. We then went after his Estate. I went and looked at the Estate file at the Probate Court and it was filling up with claims by other creditors. I knew I was in a foot race with other attorneys for other clients to get Court judgments against this creep, so I pushed the lawsuit as fast as I could towards judgment. In the end my client took about $50,000 in a settlement with the Developer's Estate. I told him he took a loss but it was not a total loss especially considering nothing was ever built by way of an investment. And also considering the deceased Developer had more debts than assets to pay them off and you can't squeeze water out of a rock.

Moral of story is to be careful who you invest with- do your research on the Developer and his promises and don't fall for bullshit.

 

[westwoody]

EB your condo experience is very interesting.

I spent a few weeks last summer visiting friends in Washington DC. They are in a new condo, about $750k.

They said they had poor hot water flow so we looked at their setup.

I was HORRIFIED by the poor construction and bad design. Wiring and plumbing would have totally failed any Winnipeg city inspection.
Their water heater, furnace and A/C was inside a small closet. There was a furnace on the floor, a ten gallon hot water tank on a shelf above, and a A/C unit on a top shelf.
Wires and propex water lines were all over the inside. There bits of metal trimmings and propex on the floor.
A loop of live electrical wire ran through the water heater's drip tray. The wires were not properly sized or insulated or grounded.
I cannot imagine any ticketed tradesman doing such shoddy work.
The owners are doctors, really smart people, but they know nothing about construction and put blind faith in the builder.

 

[ShyMan]

You guys are awesome providing me with valuable insights and facts. Thanks everyone.

I've made money and lost monies buying and selling condos in NYC, where I grew up, and SF where one of my best buddies live (and paid US$5 million for a ultra luxury condo at the now infamous Millennium Towers in SF because the building has sucked 16+ inches and tilting).

I think I'll shy away from buying a condo in Montreal. I'll stick to staying at fine hotels in Montréal. My favorites are Le Westin and Loews Hotel Vogue. Maybe I'll buy a house instead in Montréal's suburb.

Wait, I have to report to Uncle Sam that I opened up a checking account at BOM for C$11,000 -- I deposited US$8,500? I'll spend the C$ down to below C$10,000 on my next return to Montreal.