Calgary and Montreal are on track to eclipse Toronto and Vancouver as Canada’s fastest growing luxury real estate market this year as rising consumer confidence boosts demand for homes over $1 million.
A new Sotheby’s report on the luxury sector shows sales of $1 million-plus homes in Montreal increased by 20 per cent to 104 units in the first two months of this year, while transactions in Canada’s two largest metropolitan areas flagged amid headwinds from government policy interventions.
“Montreal has been Canada’s ‘dark horse’ in luxury real estate,” said Brad Henderson, president and chief executive of Sotheby’s International Realty Canada. “For many years, political uncertainty and a stagnant economy tethered performance, but those factors have now dissipated. This spring, we expect strong gains that will set new records for the city.”
An uptick in luxury sales is also expected in Calgary as growth in the province’s gross domestic product exceeds expectations and an increase in oil prices, manufacturing exports and population flows improve consumer confidence. Sales of real estate priced over $1 million rose 45 per cent to 94 units in January and February compared to the same period a year ago.
Meantime, luxury markets in Canada’s two largest metropolitan areas posted significant declines as a series of new market-cooling measures took effect. Last April, the Ontario government introduced a package of measures including rent controls and a 15 per cent foreign buyers tax. And in January, the Office of the Superintendent of Financial Institutions tightened qualification rules for uninsured mortgages.
In the Greater Toronto Area, sales of properties worth over $1 million tumbled by 55 per cent to 1,498 units, and 56 per cent to 31 units for $4-million homes in January and February, Sotheby’s said. Sales of Toronto condominiums worth over $1 million were down 10 per cent in the first two months of the year.
In Vancouver, sales of single family homes worth over $1 million fell 39 per cent to 193 units in the first two months of the year, even as the city’s condominium boom continued. Transactions of condos worth more than $1 million soared 51 per cent to 232 units sold.
Sotheby’s cautioned that the Toronto figures presented an “incomplete picture,” when compared to the first quarter of 2017, a period when sales soared to record levels.
“The first quarter of 2017 in Toronto was an abnormally high and active market so to compare it to that timeframe is to compare to an unfair benchmark,” Henderson said, adding that current economic fundamentals in Toronto, such as employment and consumer confidence, remain strong.
“The market has had to absorb a lot of shocks and when there’s uncertainty, people move to the sidelines. I think you’ll see growth in the number of transactions and continued upward pressure on prices in the second, third and fourth quarters.”
In the short term, Henderson isn’t quite so bullish on Vancouver, where aggressive new government policies – including an increased foreign buyers tax and a new speculation tax – were introduced last month.
“Specifics on those measures won’t be forthcoming for a number of months,” he said. “ So we expect activity in Vancouver to moderate or decline versus what it is now.”
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