In response to a Canada Mortgage and Housing Corporation report assessing cash flow in Montreal’s new high-rise condo towers—specifically concluding that up to 75% of investor-landlords are in the red—it’s being posited that the report paints an incomplete picture.
“What we tend to see, the smaller the unit the higher the chances of it being an investment,” Sacha Brosseau, chief brokerage officer at Sotheby’s International Realty Canada, is quoted as saying in the Montreal Gazette. “When we sell smaller sized units, more often than not, our agents that represent them see questions asked like, ‘How much do you think we can rent this for?’”
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Jennifer Walker, a broker with Sutton Group Centre Ouest and founder of the Montreal Real Estate Investor’s Group, notes that finding a new rental condo with positive cash flow isn’t without its challenges if the down payment is only 20%. However, cash flow is far from investors’ only goal.
“A lot of people buy on the potential, meaning appreciation, that the value will be going up,” Walker told the Gazette.
To be fair to the CMHC report’s author, Francis Cortellino, an economist, intended the report to be an open-ended question about the city’s condo investment market.
“This report is more of an open question about Montreal. We’d have to dig deeper,” Cortellino previously told CREW. “Investors in Montreal may be hoping for the same result that cash flow may be negative in the short-term, but when they sell their units, value would increase a lot. This report is the first step to seeing what’s going on in those new very large high-rises in Montreal.”
Previous CMHC research determined that foreign buyers are more likely than domestic purchasers to pay for their units in cash. A 2015 study found that 40% of foreign buyers who bought a downtown Montreal condo didn’t obtain a Canadian mortgage, compared to 15% of locals who did.