Verdun Plexes'

MONTREAL - Visitors to Montreal cannot help but notice the proliferation of small apartment buildings which line inner-city streets. Known as "plexes," their low-rise design and outdoor staircases have deep historic roots. The staircases could originate from French-Canadian settler habits or from a 19th-century law that required green space in front of each building. Since the latter constrained building sizes, outdoor staircases allowed more living space. The idea of stacking units on top of each other probably came from Scottish immigrants. Municipal regulations in the early 20th century set out requirements for natural light, bathrooms in each unit and building cladding, creating an official plex template.

Apartments in buildings with fewer than five storeys, like plexes, made up more than 40 per cent of occupied private dwellings in Montreal, according to the 2006 census, compared with less than 20 per cent Canada-wide. Many of these structures were constructed in the two decades from 1950 to 1971 to provide affordable housing as Montreal's population grew by 1.2 million people (nearly 80 per cent). While plexes' dominance of the market is now being eroded by condominiums, which made up 52 per cent of all starts in Montréal in 2010-11, these venerable structures continue to shelter tens of thousands.

The plex market has been a little soft recently. Plex sales lagged the overall market for the second straight year - last year's 10-per-cent drop more than doubled the marketwide decline. Meanwhile, the supply of active listings for plexes rose 17 per cent, slightly faster than the market's increase. Still, plex values remain firm; their median price rose five per cent last year, in line with gains among single-family and condominium units. As one might ex-pect, unit prices rise closer to downtown; those in the Plateau averaged $400,000 last fall, more than $100,000 above the CMA average.

But no new units have been built for years, as developers have favoured condominiums. Inevitable property aging is diminishing plexes' curb appeal and increasing maintenance costs. Still, plexes make up a significant proportion of the rental stock and benefit from strong rental demand in recent years due to heavy immigration. Indeed, CMHC reported a vacancy rate in purpose-built apartment structures with at least three units of 2.5 per cent in October 2011, well below Montréal's 3.8 per cent average over the prior 20 years.

Montreal's plexes are frequently marketed to buyers who occupy one of the units while leasing the others. Back-of-the-envelope calculations demonstrate their attraction. In midFebruary, 30 triplex structures were listed on MLS.ca, a real estate trading website, at a median price of $419,900. Amortized over 25-years with a 10-per-cent down payment, this building's principal and interest charge would be about $2,256. If two of the units were one-bedroom suites renting for the average Montreal rent in this market segment of $544, $1,168 would be left for the owner to finance every month. This is well below the estimated monthly payment of $1,700 required to service a similar mortgage on the average Montreal home. Continued strong immigration to Montreal and an aging population suggest rental demand will remain firm; this will keep plexes beckoning to investors. Although condominiums are rapidly increasing their share of the new construction market, the existing plex stock remains not just a tribute to earlier waves of Montreal settlers, but a viable housing alternative for the new generation of Montrealers.

............Cheers ! Have Fun and Remember Verdun............ - Les