Montreal’s Multi-Residential Building Growth

Montreal's Multi-Residential Building Growth

Montreal’s Multi-Residential Building Growth:
Analyzing Residential Rental, Cap-Rates, Price Per Door and Population Growth in the Last 5 Years

Montreal’s multi-residential buildings have seen significant growth over the past five years, with rental prices, cap rates, and price per unit (PPU) all trending upward in price. This growth is fueled by population growth, which is driving demand for rental units in the city.

Residential Rental Growth in Montreal

Residential rental prices in Montreal have been steadily increasing over the past five years, with an average growth rate of 3.8% per year. Further over the past five years, rent has increased 21%.  The average rent in 2017 for a two-bedroom apartment in Montreal was $854, while in 2022, the average rent had increased to $1,032.

One of the key drivers of residential rental growth in Montreal is population growth. With more people moving to the city, the demand for rental units has increased, leading to higher rental prices. Additionally, a strong job market and an increase in the number of young professionals in the city has also contributed to the growth of residential rental prices.

Cap-Rate Changes for Multi-Residential Buildings

Cap-rates for multi-residential buildings in Montreal have also been trending positively for the past five years. Cap rates are a measure of the return on investment for a property, and a lower cap rate indicates a higher value for the property. In 2016, the average cap rate for multi-residential buildings in Montreal was 4.7%, while in 2022, the average cap rate had decreased to 3.7%. This represents a decrease of 21.3% over the past five years.

The decrease in cap rates can be attributed to the high demand for multi-residential buildings in Montreal, which has led to an increase in prices per unit. This has caused the cap rate to decrease as investors are willing to pay more for these properties due to the high demand and potential for steady rental income.

Price Per Growth for Multi-Residential Buildings

Price per unit for multi-residential buildings in Montreal has also been on the rise over the past five years. In 2016, the average price per unit was $155,000 while in 2022, the average price per unit had increased to $198,000. This represents an increase of 27.7% over the past five years.

The increase in price per unit can be attributed to the high demand for multi-residential buildings in Montreal. With more people moving to the city, the demand for rental units has increased, leading to an increase in prices per unit. Additionally, the low interest rates and the potential for steady rental income have also contributed to the growth of price per unit.

Population Growth in Montreal
Population growth in Montreal has been a significant driver of growth for the multi-residential building market. Between 2016 and 2022, the population of Montreal increased from 1,704,694 to 1,761,616, representing a growth rate of 3.3%. The increase in population has led to an increase in demand for rental units, driving rental prices, cap rates, and price per unit growth for multi-residential buildings.

As of 2022, the vacancy rate in Montreal’s apartment buildings was around 1.5%, which is significantly lower than the national average for Canada of 2.2%. This means that the demand for rental units in Montreal is high, and there is a shortage of available units on the market.

The low vacancy rate can be attributed to several factors, including the city’s strong job market, high population growth, and limited new construction of rental units. Additionally, the COVID-19 pandemic has also contributed to the low vacancy rate, as many people have delayed moving due to uncertainty about the economy and travel restrictions.

The low vacancy rate has led to increased competition among renters for available units, driving up rental prices and making it more difficult for renters to find affordable housing. It has also made Montreal’s multi-residential building market attractive for investors, as the high demand for rental units has led to steady rental income and potential for appreciation in property values.

Conclusion
Montreal’s multi-residential building market has experienced significant growth over the past five years, with rental prices, cap rates, and price per unit all experiencing upward trends. Population growth has been a significant driver of this growth, with more people moving to the city and increasing demand

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