GTA luxury market set for a strong fall season
Strengthening consumer engagement and robust economic fundamentals are expected to drive the GTA luxury market this fall, as sales of homes valued at more than $1 million are on the rebound.
New data compiled by Sotheby’s International Realty Canada reveals that Greater Toronto Area residential real estate activity of more than $1 million and luxury activity of more than $4 million are gaining traction; summer sales rose 19 per cent and 34 per cent year-over-year, respectively.
“Toronto’s top-tier real estate market is positioned for a turnaround this fall,” says Brad Henderson, president and CEO, Sotheby’s International Realty Canada. “Since the introduction of Ontario’s Fair Housing Plan in April 2017, the market has maintained ground in spite of rapid policy changes, as well as rising mortgage rates and tighter lending guidelines. Market psychology has now adjusted, and we expect the fall market to be more active.”
In contrast, high-end home sales and prices are softening in Vancouver, not only in the single-family home segment, but also in condos and multi-family homes. In Calgary, top-tier real estate has remained unsettled, in parallel to the city’s economic progress, while luxury sales in Montreal are projected to end the year on a positive note.
Canada’s economy expanded at a robust pace of 2.9 per cent in the second quarter of 2018, following a weak start of the year, according to the Conference Board of Canada.
While economic growth is expected to slow in the third quarter of the year, it remains strong enough to warrant a gradual reduction in monetary stimulus, according to the Bank of Canada.
Solid national economic fundamentals bode well for Canada’s top-tier real estate markets this fall, elevating high performance markets such as Toronto and Montreal, while buffering consumer confidence in markets such as Vancouver and Calgary that are encountering local headwinds.
Although the Bank of Canada maintained its key rate at 1.5 per cent in September, it has signalled the potential for another rate hike in October given solidifying economic conditions. The gradual and incremental rise in lending rates will affect consumer purchasing power in the conventional housing segment; however, the impact on luxury homebuyers remains less significant.
The national unemployment rate, as well as the unemployment rate in the key metropolitan areas of Montreal, Toronto and Vancouver, continue to hover at decade-lows, anchoring conventional and top-tier real estate market performance with concurrent job gains that retain and attract new residents. Canada’s unemployment rate hovered at six per cent in August, while Toronto sat at 6.1 per cent.
The new mortgage stress test weighed on the conventional real estate market earlier in 2018, however, its impact was less pronounced across the majority of Canada’s major luxury markets.
The top-tier real estate market in the GTA is poised to rebound this fall as consumer confidence rallies. Apprehension following the introduction of the Ontario Fair Housing Plan in April 2017 and the tightening of mortgage lending rules and rising rates earlier in 2018 have dissipated; pent up consumer demand coupled with renewed top-tier listing activity is expected to propel gains in sales, velocity and pricing across all housing segments to the end of 2018.
In spite of seasonal tendencies for real estate activity to slow over the summer, top-tier sales activity strengthened in July and August, reflecting a shift towards renewed seller, buyer and investor engagement, and a transition into an active fall market.
The high-end condominium market saw the most pronounced gains in sales activity over the summer months, anticipating a strong fall. Sales of units more than $1 million increased 28 per cent in the GTA and 21 per cent in the city of Toronto. Four condominiums sold for more than $4 million in Toronto, on par with sales in the previous year. Changing demographics and consumer preferences favouring urban lifestyles continue to motivate the migration of real estate consumers and investors into condominiums in the city’s central core, bolstering the market with healthy local demand.
Sales of single-family homes of more than $1 million rose 20 per cent year-over-year in the GTA and 12 per cent in the city of Toronto; however, summer activity remained capped by a shortage of available listings on the market particularly in the $1 million to $2.5 million segment. Luxury home sales of more than $4 million also experienced strong year-over-year gains. Attached home sales of more than $1 million experienced six and eight per cent year-over-year gains in the GTA and Toronto, respectively.
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