Interesting to talk to real estate professionals doing business at ground level, getting hour-by-hour information, actual feedback, detailing where the luxury real estate market in Canada is heading, especially in the face of the coronavirus headwinds.
No one here is going to criticize the media for sensationalizing the crisis, since we are entering into a great unknown. Canada yesterday suffered its first death related to the virus – a man at a seniors care home in North Vancouver. There is a great article here on how B.C. Provincial Health Officer Dr. Bonnie Henry has been a steady voice in the wake of a public storm. People like Dr. Henry speak to the stability and sophistication of our health system.
Meanwhile, the stock market craters, despite today’s rollercoaster ride. Sports and cultural events are being cancelled en masse. Schools, work, and travel are disrupted. Cruise ships housing thousands of passengers and crew are being left at sea without a place to dock.
Last week, faced with rising numbers of those afflicted, U.S. President Donald Trump just had to slip in a comment during a news conference at the Atlanta headquarters of the Centers for Disease Control and Prevention about how brilliant his understanding of science was (“Maybe I have a natural ability,” he said at the event.), all while being criticized in some quarters for underplaying or outright dismissing the impact of the virus on Americans. On the flip side, Conservative media was giving him credit for shutting down the borders to Chinese coming into the country earlier than other countries, giving Americans a head start in controlling the numbers of those stricken with the virus.
Amid the chaos, fuzzy messaging and blame games it’s tough to find any truth nuggets, outside of needing to wash your hands a lot. You might be surprised though to hear what real estate professionals are saying about the impact of all this on the luxury real estate market.
According to luxury real estate specialist Justin Cohen, Vice President and Broker, RE/MAX Realtron Barry Cohen Homes Inc., even with the spread of coronavirus, the pillars that support a strong luxury market across Canada remain well entrenched, factors like rising immigration, a cut in interest rates, a loosening of mortgage stress tests, and perhaps most significantly in the face of a worldwide health crisis – Canada’s reputation as a safe, stable place to park your money, firmly established from a banking perspective during the financial crisis 12 years ago, and further augmented now from a healthcare perspective, as people fear further spread of a deadly virus.
As the coronavirus crisis winds down, new cases lessen, news about vaccinations starts to spread, the markets calm, Italy opens it borders, and there are more stories like these, where China starts to show the world they actually have a grip on this, Cohen predicts a whole new level of interest among foreign buyers in the Canadian luxury market.
“There is going to be a whole new level of motivation from foreign buyers,” he says, led by China, especially Hong Kong, and Iran. Before the virus hit, Cohen pointed to more of a comfort level among buyers, that sales figures were getting into the territory seen in March and April 2017, when the luxury market hit its peak. Then came market factors like the foreign buyers tax, mortgage stress test, provincial and federal elections, and trade wars with China and the renegotiation of the Canada-U.S.-Mexico free trade again. The waters were choppy, factors that were causing domestic and foreign buyers to pause.
“Now the only thing holding things back is the coronavirus,” he says. The last month and half, the luxury market has been “crazy”, he adds, with Toronto leading the charge (with Montreal continuing to perform strongly as well), among foreign buyer interest, especially. Cohen predicts a ten per cent jump in the luxury market for 2020.
“Over the last few years, foreign buyers would come for a few weeks, look at some houses, and as they were heading to the airport, they would give you a low ball offer, on the house they liked the best,” Cohen says. “If they didn’t get it, the mentality was okay, I will be back in a few months and we will try that again.
“Now, they are not leaving, they are coming for brief trips, and they are here to stay. It used to be financial, even political reasons, to buy. Now (the factors for foreign buyers) are health and freedom.”
When talking the overall market, domestic as well as foreign buyers, the last RE/MAX report on the luxury market was last November, when they reported that year-to-date sales in the GTA of freehold and condominium properties priced in excess of $5 million topped 100 units between January and October 31, an 8.5 per cent increase compared to the same period in 2018. Domestic buyers were steadily returning to the luxe market, according to their report.
While both the top and bottom of the luxury segment climbed, with sales over $2 million up just over nine per cent (1,975 versus 1,809) and an 8.5-per-cent increase in the number of $5-million-plus homes sold year-to-date in 2019, sales of homes priced between $3 million and $4.99 million lagged behind 2018 levels, down 4.7 per cent.
So we’ll see how things plays out. More feedback from people on the front lines of the luxury real estate industry in the coming days.