Luxury home sales in Greater Vancouver and the Greater Toronto Area (GTA) fell significantly in the first four months of the year, but prices have remained relatively resilient, according to a Royal LePage report.
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 OSFI at the beginning of 2018 has created market turmoil, for example, causing buyers to move to the sidelines to gauge the impact on luxury home prices.
This was also witnessed in the residential resale market, says Royal LePage.
More significantly, the 2018 provincial budget in B.C. included policies targeting foreign and domestic buyers who do not pay tax in the province. It also included a tax increase for all homes valued at more than $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, which first came on the scene in April 2017, has dampened price expectations for the GTA region.
What about prices?
The Greater Montreal Area posted the largest year-over-year price gain in the detached luxury home segment in the first four months of 2018, increasing 9.1% 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.
“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,” says Phil Soper, president and CEO of 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,” he adds.
What was surprising is, during the same period, the price appreciation of a luxury condominium in Greater Vancouver and the GTA outpaced that of a luxury detached home, with median condo prices rising by 7% and 10.4% year-over-year, respectively.
The median price of a luxury condo in the Greater Montreal Area and Ottawa rose by 3.9% and 4%, respectively, while Calgary posted the only decline, decreasing 6.1%.
“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,” says Soper, who notes boomers are “finally exiting their large family homes, and luxury condos, with their low maintenance lifestyles, are the favoured destination.”
Also, wealthy homebuyers aren’t immune from the strain of rising prices, Soper adds. “They didn’t reach the point in their lives where they have the capacity to acquire high-value real estate without being financially astute. Luxury condominiums represent value in today’s market.”
Spring 2019 forecast
The momentum behind luxury condo price growth is forecast to continue through the year and into the 2019 spring market in all cities surveyed, with the exception of Calgary.
Broken out by region, the median price of a luxury condo in the GTA is forecast to post the largest price gain, rising 8% to $1,847,194 in the first four months of 2019 compared to the same period in 2018.
Over the same timeframe, the prices of luxury condos in both Ottawa and the Greater Montreal Area are forecast to increase 3%.
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% year-over-year.
Detached luxury home prices in Greater Vancouver are forecast to decline in the first four months of 2019, decreasing 3% year-over-year to $5,619,153, while properties in this segment in the GTA are estimated to remain flat over the same period.
The Greater Montreal Area and Ottawa are both forecast to increase 5% year-over-year, and detached luxury homes in Calgary are expected to rise 2% during the same period.