While luxury homes sales in the Greater Toronto Area (GTA), Oakville and HamiltonBurlington have fallen short of last year’s record-breaking pace, this segment of the market will still see plenty of activity in 2018, finds a report by RE/MAX INTEGRA Ontario-Atlantic Region.

The report notes 76 freehold and condominium properties sold over the $3-million price point in the GTA between Jan. 1 and Feb. 28, down from 180 sales during the same period in 2017. In the $5-million-plus category, luxury sales fell 46% to 15 transactions in the GTA, compared with 28 one year ago. Oakville reports slower sales in the first two months of the year as well, with six homes selling over $3 million, compared to 15 one year ago.

Read: Big banks’ forecasts for growth, rate hikes

Meanwhile, 59 homes sold for over $1 million in HamiltonBurlington, down from 133 in 2017. Only condominium apartments and townhouses located in Toronto proper bucked the trend, with eight sales over $3 million so far this year, up from five during the same period in 2017.

“Sales of upper-end homes year to date are more in line with 2016 volumes rather than 2017, which should be distinguished as an outlier year for luxury real estate,” says Christopher Alexander, executive vice-president and regional director, RE/MAX INTEGRA Ontario-Atlantic Region, in a release. “Any comparison will fall short of 2017 levels throughout much of the spring, but demand for luxury product is likely to improve by early summer and carry through to the remainder of the year.”

What will drive demand?

The Capgemini World Wealth Report for 2017 notes the population of high-net-worth individuals in Canada—the vast majority of whom live in Ontario—rose 11.3% in 2016, while net worth increased 11.7% to US$1.1 trillion.

Read: Home construction rises in February: CMHC

From the standpoint of foreign investors, the combination of a strong U.S. dollar and undervaluation from a global perspective, Ontario is ripe for investment. In fact, the GTA and the surrounding areas have stepped into the spotlight in recent years, often dominating the top positions in world rankings, including the best city in the world by The Economist and one of top 10 most innovative cities in the world by the Melbourne-based “Innovation Cities Index.”

According to Numbeo, a crowd-sourced property price comparison site, the price per sq. ft. for an apartment in Toronto’s city centre hovers at approximately $791.17—making the city look like a bargain by international standards.

Read: BoC holds key rate, citing U.S. trade uncertainty

As a result, foreign investors will continue to be a major driver of sales at the top end of the GTA housing market. “The accumulation of real estate is an integral component of their overall investment strategy, and as such, the foreign buyer tax is not a deterrent. It is just the cost of doing business in Ontario,” Alexander said.

Given solid economic fundamentals throughout the Golden Horseshoe, the current pause in luxury home-buying activity is enigmatic, he said.

Read: BMO extends mortgage rate guarantee period for homebuyers

“As market conditions stabilize, and uncertainty regarding rising mortgage rates and more stringent lending practices diminishes, home-buying activity in the top-end of the market will resume at a more sustainable pace,” he said.