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Quebec and Real Estate Appraisals Keep Calm and Carry On

March 24, 2014:

Relocation professionals and Human Resources departments responsible for domestic Canadian mobility should be aware that some appraisers are making negative forecasting adjustments on properties in predominately Anglophone real estate markets in the Greater Montreal area, due to the possibility of a PQ majority government after the election next month.

First, it should be noted that a PQ majority government is far from a foregone conclusion, but markets do not like uncertainty, and this includes real estate markets.

Flat real estate for the last year and more

Those in the relocation industry and those with corporate mobility are likely already aware that the general Montreal market has been soft in a number of its segments for some time now.  Lower priced properties (under $400,000 approximately) still tend to sell well in the West Island, as well as in most other locations.  However, the more expensive properties have seen about a year of sluggishness, with this more exacerbated in the West Island than in other areas.

The reason for this sluggishness is partially due to regular market forces, and increased competition in the Montreal suburbs in the higher priced ranges.  There are simply a greater number of nice, executive style homes for people to choose from in both Laval and on the South Shore than there were in the past.  However, the swearing in of the current PQ government in September of 2012 and some of its subsequently implemented tax changes did throw a chill on investment in the province, and created a general feeling in the business community that the climate was less business-friendly than before and the future more uncertain than it had been in the past.

What about Appraisals before the election?

One appraiser, who asked to remain anonymous, did note that currently, and up until the April 7, 2014 election, homes in the predominately Anglophone areas of Montreal will see negative forecasting adjustments to reflect the inherent uncertainty in the marketplace.

What about the after the election?

There is every possibility that the election will produce another minority government, be it PQ or Liberal.  If this is the case, then real estate markets in greater Montreal are likely to remain flat and sluggish, with slightly stronger demand in the lower price ranges (below $400,000) remaining.  However, from an appraisal perspective, negative forecasting adjustments are likely to be removed or reduced, depending on the tenor from the minority government in question.

If, on the other hand, there is a majority PQ Government formed, the appraiser we interviewed notes that “history dictates that such a victory can mean a relatively quick decline in values of between 20% and 30% in predominately Anglophone real estate regions.”

What to do if you are relocating employees under home sale plans?

The business needs of the relocation should dictate what you do with your relocations far more than the upcoming election.  However, it will be hard to justify a -20% forecasting adjustment for a property that is appraised today, versus that negative adjustment possibly disappearing after April 8.  This will be quite upsetting to employees that relocate with home sale programs.  “If I had just waited 20 days, my valuation would be higher!”

Betting on an election outcome is not even worthy of consideration for Canadian businesses, so All Points cannot recommend putting off appraisals until after April 8.  However, it is reasonable to conclude that if there is an appraisal conducted pre-April 7, and if that appraisal does have a negative forecasting adjustment, that the company pay for a re-assessment of the forecasting adjustment after April 8 and if there is a change, reflect this increase in valuation in the employee’s Guarantee Plan Price.

Posted on March 24, 2014 in Relolert

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