According to Don Kottick, President and CEO of Sotheby’s International Realty Canada, any market uncertainty surrounding the recent Canadian federal election, and the minority Liberal government that came out of that, was short-lived.
Before the vote, there was what Kottick describes as a very brief sales lull in major metropolitan markets across Canada. Prospective buyers and sellers were waiting on the outcome. But if there’s one thing people in the industry know – elections don’t determine luxury demand and sales activity, market forces do.
“Since then, markets have resumed their previous tempo,” Kottick tells Regarding Luxury.
Every housing type over $1 million in the GTA saw a big increase year-over-year in July and August – condo, attached, and single family home sales, rising 13 per cent, 45 per cent and 29 per cent from 2018 levels, respectively. In the City of Toronto, $1 million-plus sales rose 25 per cent year-over-year, while sales of properties over $4 million fell 23 per cent. Over 90 per cent of condo sales over $1 million were between $1-$2 million – a 19 per cent year-to-year increase in July and August in the GTA, and a 19 per cent increase in the city of Toronto.
Sales remained healthy into the Fall months, according to the report – in the GTA, overall sales (condos, attached, and single family homes) over $1 million were up 53 per cent, while sales over $4 million were up 75 per cent. In the City of Toronto overall sales over $1 million were up 42 per cent year-over-year.
Sotheby’s reporting pointed to pent-up consumer demand in Vancouver, with an overall 25 per cent increase in residential sales of homes over $1 million in July and August, compared to the same months in 2018 (however there was a decrease in sales over $1 million in September, suggesting a softening in the market there – more on that in the coming weeks).
Limited inventory in Montreal’s luxury neighbourhoods constrained sales there, but it’s still very much an ongoing success story in terms of market growth – just a one per cent year-over-year increase over the summer in sales of properties over $1 million matched up against 2018’s record highs. Sotheby’s reports a 38 per cent surge in sales volume over the first half of September suggesting healthy demand over the rest of the Fall months.
“In major cities like Toronto and Montreal for example, solid economic fundamentals, population gains spurred by immigration and in-migration, and limited top-tier real estate inventory have been driving strong consumer demand,” Kottick says.
The Bank of Canada maintained its rate at 1.75 per cent in September, creating a market that discourages mortgage rate increases, the country has experienced economic gains and solid job gains, and Montreal’s and Toronto’s unemployment rates have hovered around the national average (5.7 per cent) of 5.6 per cent and 5.9 per cent, respectively. Vancouver’s unemployment rate was at 4.4 per cent – lowest of the major metropolitan areas in Canada. The expansion or retraction of this government’s mortgage stress test policy will be something to watch over the next few years.
But a big factor driving the strength of the luxury market continues to be increased uncertainty in financial markets, U.S.-China tensions, the possible impeachment of a U.S. president, Brexit uncertainty, Russia-West tensions, Hong Kong turmoil, Iran and North Korea.
Viewers of the popular Million Dollar Listing New York television series of late have seen stories of brokers there operating against the stiff winds of a sales downturn in that market.
More and more, Canada has a reputation worldwide for stability and liveability, amplifying foreign investment into the top-tier real estate market in major Canadian cities.
“Canadian real estate has always been a ‘safe haven’ for affluent home buyers and investors,” Kottick says. “Given the uncertainty in global financial markets and given political and economic turmoil in other countries around the world, luxury real estate continues to hold broad local and global appeal.”
Lifestyle changes are pushing condo sales, especially in Toronto, says Christopher Alexander, Executive Vice President and Regional Director, Re/Max Ontario-Atlantic. According to the Sotheby’s report, over the first 15 days of September, $1 million-plus condos in the city of Toronto had a 74 per cent year-over-year spike.
“If you live in the city, you have everything at your finger tips – entertainment, restaurants, groceries,” Alexander says. “You can walk to everything, take public transit. Being close to work is important to people. Commuting is more and more difficult. We should have another similar year next year. Interest rates are not projected to rise. If they do, it will be little. We should see a good, healthy price appreciation. Luxury is not moving as quickly as the rest of the market, because the pool of buyers for luxury is smaller. Overall it’s starting to catch up more. I think luxury sales will do better next year than it did this past year.”
Top Image: Sotheby’s Realty Canada listing, 3 Rue des Jardins-Merici, Apt. 707, La Cite, Que., $1,298,000. Source: Instagram, @canada_sir
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