TORONTO, May 10, 2018 – Canada’s spring luxury real estate market is well underway in Canada’s largest cities. While sales in Greater Vancouver and the Greater Toronto Area (GTA) are significantly down in the first four months of the year, luxury home prices have remained relatively resilient, according to Royal LePage.
Overall, sales activity declined in Greater Vancouver and the GTA
luxury real estate market as both sellers and buyers adjusted to federal and
provincial measures affecting both domestic and foreign buyers. The introduction
of the new mortgage stress test implemented by the Office of the Superintendent
of Financial Institutions (OSFI) at the beginning of 2018 created market
turmoil as buyers moved to the sidelines in order to gauge the impact on luxury
home prices, similar to what was witnessed in the overall residential resale
market. More significantly, in British Columbia, the 2018 provincial budget
included policies targeting foreign and domestic buyers who do not pay tax in
the province, as well as a tax increase for all homes over $3-million through
increases to the property transfer and school tax. Similarly, the non-resident
property tax included in Ontario’s 16-Point Fair Housing Plan dampened price
expectations for the GTA region.
“Home prices in Canada’s luxury real estate market have remained
remarkably resilient when you consider the economic headwinds that serial
government interventions have created,” said Phil Soper, president and CEO,
Royal LePage. “The resilience of home values reflects the strong aspirations of
luxury buyers to reside and work in cities that are consistently ranked among
the most desirable on the planet.”
During the first four months of 2018, price appreciation of a
luxury condominium in Greater Vancouver and the GTA outpaced that of a luxury
detached home, with median condominium prices rising by 7.0 per cent and 10.4
per cent year-over-year, respectively. For the same period, the median price of
a luxury condominium in the Greater Montreal Area and Ottawa rose by 3.9 per
cent and 4.0 per cent, respectively, while Calgary posted the only decline,
decreasing 6.1 per cent.
The Greater Montreal Area posted the largest year-over-year price
gain in the detached luxury home segment, increasing 9.1 per cent to $1,569,515
in the first four months of the year. During the same period, detached luxury
homes in Ottawa (6.3%) and Greater Vancouver (5.2%) also saw prices rise, while
home values in Calgary (0.6%) and the Greater Toronto Area (-0.2%) remained
flat.
“Somewhat unusual in historical terms, and reflecting an important
demographic shift happening across North America, appreciation in the luxury
condominium market is outpacing the traditional target for large value
residential property investment, the detached house,” said Soper. “Baby Boomers
are finally exiting their large family homes, and luxury condos, with their low
maintenance lifestyles, are the favoured destination.
“Contrary to popular belief, wealthy homebuyers are price
sensitive too. They didn’t reach the point in their lives where they have the
capacity to acquire high-value real estate without being financially astute,”
concluded Soper. “Luxury condominiums represent value in today’s market.”
Spring
2019 Forecast
The momentum behind luxury condominium price growth is forecast to
continue through the year and into the 2019 spring market in all cities
surveyed, with the exception of Calgary. When broken out by region, the median
price of a luxury condominium in the GTA is forecast to post the largest price
gain, rising 8.0 per cent to $1,847,194 in the first four months of 2019 when
compared to the same period in 2018. Over the same timeframe, luxury
condominiums in both Ottawa and the Greater Montreal Area are forecast to
increase 3.0 per cent. Calgary is the only city surveyed that is expected to
see the median price of a luxury condominium dip in spring 2019 when compared
to 2018, decreasing 4.0 per cent year-over-year.
Detached luxury home prices in Greater Vancouver are forecast to
decline in the first four months of 2019, decreasing 3.0 per cent
year-over-year to $5,619,153, while properties in this segment in the GTA are
estimated to remain flat (0.0%) over the same period. The Greater Montreal Area
and Ottawa are both forecast to increase 5.0 per cent year-over-year, and detached
luxury homes in Calgary are expected to rise 2.0 per cent during the same
period.
Greater
Toronto Area (GTA)
GTA
luxury home price appreciation falls flat after the introduction of Ontario’s
16-Point Fair Housing Plan and OSFI’s most recent mortgage stress test, while
luxury condos make largest price gain of any region studied
The median price of a luxury detached home in the Greater Toronto
Area remained relatively unchanged (-0.2%) at $3,522,117 in the first four
months of 2018, while the median price of a luxury condominium increased 10.4
per cent year-over-year to $1,710,365 during the same period.
On April 20th, 2017, the Ontario government introduced a 15 per
cent non-resident tax on home prices in the Golden Horseshoe as part of the
province’s 16-Point Fair Housing Plan. Leading up to the announcement, the
median price of a luxury detached home in the first four months of 2017 was
$3,527,882, a 23 per cent increase over the same period in 2016, while luxury
condos appreciated 8 per cent to $1,549,864.
“When examining the second half of 2017, it is clear that the
province’s measures have impacted price appreciation in the Greater Toronto
Area’s luxury home market,” said Soper. “The new OSFI mortgage stress test
introduced in January, in addition to dampening sales, has also put further
downward pressure on detached luxury home prices.”
During the first quarter of 2018, luxury detached home sales
decreased 67.9 per sent year-over-year. However the decline was
significantly more modest when compared to the same period in 2016 (-18.1%). In
the first quarter of 2018, luxury condominium sales decreased 28.2 per cent
year-over-year compared to the same period in 2017, while almost twice as high
(90.6%) compared the same period in 2016.
The region’s high quality of life for families, a result of good
schools and excellent healthcare, is expected to continue to drive foreign
buyer interest in the detached luxury home segment once the real estate market
adjusts to government measures, and consumer confidence improves.
“Foreign buyers looking at luxury properties in the Greater
Toronto Area can often prioritize lifestyle over finances but they also have
the privilege of flexibility, allowing them time to watch the market,” said
Elli Davis, sales representative, Royal LePage Real Estate Services Ltd. “The
draw for many foreign buyers is our excellent quality of life. While some may
choose to sit on the sidelines to gauge the market, the desire to relocate here
is still strong.”
While luxury home price appreciation stalled, demand for luxury
condominiums remained strong largely driven by established homeowners.
“The selection of luxury condominiums has greatly increased over
the years and we are seeing more retirees selling their luxury homes to buy
condos with great amenities and little upkeep. Condominiums are also easy
properties to manage when you want to spend more time travelling,” added Davis.
When looking ahead to the 2019 spring market, the median price of
a luxury condominium in the Greater Toronto Area is forecast to increase 8.0
per cent year-over-year to $1,874,194, while the median price of a luxury
detached home is forecast to remain flat (0.0%) at $3,523,378 when examining
the first four months of the year.
“Our longer term
forecast for the Greater Toronto Area real estate market, including the luxury
market, is for healthy price appreciation. The region has experienced
significant inventory shortages for many years, has a robust economy and an
international reputation as a great place to live and work,” concluded Davis.
