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When developers Cadillac Fairview and Canderel announced plans for a 50-storey Montreal condominium tower branded with professional hockey’s iconic Canadiens logo, it looked like a one-off event in the city that Canada’s real estate boom had forgot.

Apart from a small number of hockey fans drawn to the novelty of owning a square box in the sky adjacent to the Canadiens’ home ice, there appeared to be limited demand in Montreal for the type of tall-condo developments that had become common in Toronto and Vancouver.

Five years later, with the third Canadiens tower now under construction, no one’s talking about a one-off any more. Montreal is in the throes of a tall-condo boom that has radically, if somewhat controversially, transformed the city’s skyline.

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The implementation of foreign-buyer taxes in Vancouver and Toronto has not just helped tame those cities' real estate markets; it has made Montreal the new hot spot for overseas investors.

Montreal was the “most sought after Canadian destination” for Chinese buyers in 2017, according to an October study by Canada Mortgage and Housing Corp., which cited the Chinese website Juwai.com. Chinese nationals accounted for 20 per cent of non-resident buyers in Montreal last year. That proportion grew to 30 per cent in the first eight months of 2018.

Foreign buyers accounted for 12 per cent of downtown condo sales between January and August of this year, but only 2 per cent of overall housing sales in the Montreal census metropolitan area (CMA). That suggests the Montreal market is running on parallel tracks: downtown versus everywhere else.

The influx of Chinese buyers, as well as domestic and foreign investors alike, helped push the average condo price in the downtown Ville-Marie borough 14 per cent higher in the third quarter of this year, to almost $474,000, according to the Greater Montreal Real Estate Board. That compares with a 5-per-cent price increase, to $312,000, across the Montreal CMA.

Indeed, condo values in downtown Montreal are fast catching up to those in Toronto on the basis of price-per-square-foot. And while Montreal’s reinvigorated economy has something to do with that, with many younger workers in the city’s high-tech sector preferring to live centrally, the downtown condo boom does not appear to be driven principally by local demand.

A separate CMHC study this month found that investors account for 57 per cent of owners in “very large high-rise condominium” towers in downtown Montreal. The study compiled data on 375 rented condo units in these buildings and found that 75 per cent had a negative cash flow, with mortgage and operating fees exceeding average monthly rental income by $385.

The study was based on an average 20-per-cent down payment, while most investors are believed to put down more than that. But the study’s conclusions provided further evidence that downtown Montreal condo prices are out of reach for most local owner-occupiers. Average incomes and rents are still much lower in Montreal than in Toronto and Vancouver. An average two-bedroom apartment in Montreal rented for $809 a month, according to CMHC, compared to $1,467 in Toronto and $1,649 in Vancouver.

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Lower monthly rents in Montreal help explain why so many downtown condo investors have turned to short-term rentals. Downtown condos rented out on online platforms such as AirBnB can fetch $200 or more a night. Many of the most recent towers appear to have been designed to maximize the potential to attract tourists, with high-end amenities, spas and proximity to the city’s best shopping, nightlife and other attractions.

The first Canadiens tower earned a reputation for its raucous parties and the mess left behind by tourists in town for events at the adjacent Bell Centre, or just to have a good time in the one Canadian city that never sleeps.

In June, the Ville-Marie borough adopted new regulations limiting tourist rentals to the Sainte-Catherine Street strip. That was in addition to a Quebec law that requires owners seeking to rent out their homes on a short-term basis to obtain a licence from the Ministry of Tourism. A few weeks later, the condo board in the Canadiens tower officially banned short-term rentals. But enforcement is another matter.

Two weeks ago, local developer Devimco announced plans to build twin 51- and 53-storey condo towers on a vacant lot on Sainte-Catherine overlooking Montreal’s Place des Festivals, home to the city’s world-renowned Jazz Fest and other outdoor events. It’s hard to imagine a location better suited to tourists than one that is only an elevator ride away from outdoor concerts and activities that stretch late into the night.

So far, Montreal Mayor Valérie Plante’s adminstration is cool to Devimco’s idea. The mayor is also planning to ask the new Coalition Avenir Québec provincial government for the power to slap a foreign-buyer tax on properties in the city.

If Ms. Plante gets her way, the great downtown Montreal condo boom may already have hit its peak.

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