Open the front door and let in the light, so to speak. Sotheby’s International Realty Canada released its latest luxury market housing data in late September, and any suggestion of a market slowdown seems to be a thing of the past.

As Brad Henderson, president and chief executive officer of Sotheby’s International Realty Canada said, with the Ontario Fair Housing Plan, aimed at putting checks on a hot market by slapping a 15 per cent tax on home purchases by foreign buyers, on top of a tightening of requirements for people getting mortgages, the market saw its period of “doldrums”, but even that requires some perspective.

“When you look at the market year over year, comparing January 2017 to January 2018, it appeared that the market was down,” he said. “But January 2017 was a historic month.”

So the first quarter in 2018 was, in fact, a market that was back to a more normal pace, given that people were comparing it to what was an abnormal period of time.

Through the second quarter and into the third, though, it’s a different game.

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“Market psychology has now adjusted and we expect the fall market to be more active,” he said. The Sotheby’s study is national in focus. High-end sales and prices are softening in Vancouver, by comparison, but Toronto is heading up.

Paul Peterson, of Blue Elephant Realty, based in the King West area in Toronto’s downtown, has seen it first hand. The “true luxury market”, as Mr. Peterson called it, properties $4 million and above, are up dramatically, from his vantage point.

The “hangover” he said was caused not only by policy changes, higher borrowing costs, and stricter lending guidelines, but also by people waiting for the numbers to drop from, “the insane high they were on in 2017.” Mr. Peterson pointed to a house listed on Woodlawn now at $7 million, where the buyers are holding back, anticipating a bidding war.

“A bidding war (for a $7 million home) would never have happened earlier this year,” he said.

According to the Sotheby’s study, look to strong economic fundamentals, like an expanding economy, nationally, a lowering of the unemployment rate in metropolitan areas like Toronto, and consumer confidence, as the buoys. There was pent-up demand in the market as buyers, sellers and investors took a seat on the sidelines.

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July and August sales volume in the GTA over $1 million, for condos, attached and single family homes, increased 19 per cent year-over-year. Sales for properties over $4 million increased 34 per cent.

The luxury condo market saw the most dramatic growth – sales over $1 million jumped 28 per cent in the GTA and 21 per cent in the City of Toronto – also bolstered by consumer preferences for the urban lifestyle. Mr. Henderson pointed to higher levels of fresh inventory coming into the market this fall, combined with “brisk” buyer activity.

Developers can see it. Shane Baghai reported an uptick in sales of his company’s 38-suite luxury project called Leaside Manor over the past few months, with prices around $1,200 per square feet. Mr. Baghai predicted another 20 per cent in price increases across Metro Toronto within the next two years.

Sam Mizrahi, President of Mizrahi Developments, the company developing The One – the 85-storey, uber-luxury retail and restaurants, hotel and condominium tower being built on the southwest corner of Yonge and Bloor (image up top is a rendering of the garden terrace) – says his team there has sold 75% of the units since sales got going last January.

Buyers of The One for example typically are not the types impacted at all by the tightening in the mortgage market. He said Boomers have accounted for 50 per cent of sales so far, and the dramatic uptick over the summer months was more for suites between 2,000 and 6,300 square feet – where homeowners downsizing from single family luxury homes in Forest Hill or Rosedale can still replicate a full-featured home layout, with room for privacy as well as room for entertaining.

LEASIDE MANOR

According to Mr. Mizrahi, what has driven the “strong velocity” in sales at The One has also been factors like the location – residents will be wired into the downtown nexus of the city – the architecture of the building, and the overall quality and uniqueness of the project, in part building on the reputations of Mizrahi projects like 128 Hazelton and 181 Davenport.

Similarly, Yorkville Private Estates, developed by Camrost Felcorp, and located atop Cumberland Tower, is inspired by next-level-up, luxury residential markets in London, Paris and New York, offering residents discreet elegance and world-class sophistication.

“It’s very predictable after government intervention that many of the players move to the sidelines,” Mr. Henderson said. “The activity levels go down, and anyone that has to sell will have to come to grips with the realities of the marketplace. Anyone who doesn’t have to sell will sit on the sidelines and wait for the market to recover. That is what the Toronto market did.”

He added the market is still seeing an inventory problem, with new home construction falling behind, so the market will continue to see upward pressure on prices going forward. The only real potential headwind is an additional Bank of Canada rate hike.

By comparison, Montreal is still moving forward as a good news story.

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In fact, as Mr. Henderson said, it’s always been a strong market, but was overshadowed by the “unbelievable activity” levels in Toronto and Vancouver from 2015-2017.

“After those markets cooled a bit, Montreal started to stand out more relative to those other markets and continues to do so,” he said.

According to Sotheby’s data, Montreal was the only major Canadian city to record year-over-year gains in terms of residential real estate volume in the first half of 2018 – a 24 per cent increase. July and August residential real estate sales over $1 million increased by 19 per cent over the same months in 2017 – with the luxury condo market seeing a 93 per cent year-over-year surge.

The results of the provincial election earlier in October that saw the Coalition Avenir Québec come to power with a majority government while the separatist Parti Québécois hit a historic low in the popular vote should translate into a further jolt in market confidence for the luxury market in Montreal going forward, Mr. Henderson added.