Gains in luxury home-buying activity set tone for robust spring housing market in major Canadian centres: RE/MAX Canada
RE/MAX Canada’s 2024 Spotlight on Luxury Report recently examined luxury home-buying activity in 10 markets across the country in the first two months of the year and found that almost all regions reported a strong start to the year despite a disconnect between buyers looking for deals and sellers’ price expectations.
According to the report, ninety per cent of markets experienced an increase in high-end sales, with more than two-thirds recording double-digit growth.
Saskatoon led the country in terms of percentage increases, with a 57 per cent increase in luxury home sales, followed by Montreal at almost 56 per cent and Calgary at 52 per cent, revealed the report.
The report noted that Edmonton posted a 32-per-cent increase in luxury sales year-over-year, while Winnipeg, Halifax, Toronto and London reported increases of 19.4 per cent, 16.7 per cent, 14.4 per cent, and 9.4 per cent respectively. According to the report, only Ottawa saw a decline in comparison to year-ago levels, with sales down almost eight per cent.
“While figures remain off peak levels reported during Covid, the upswing in luxury sales signal a return to overall health in the country’s major centres,” said RE/MAX Canada president Christopher Alexander. “The ripple effect is already underway, with stronger home-buying activity at lower price points pushing sales into the upper end. In some cities where inventory levels are particularly challenging at the lower end, multiple offers have returned with a vengeance. While that isn’t the case at the top end, pent-up demand does exist, and activity is gaining momentum.”
The report noted that lower overall values, strong equity gains and downward trending interest rates are supporting demand for luxury product which includes freehold and condominium properties in markets across Canada.
According to the report, an ample supply of product exists in most markets, regardless of some neighbourhoods experiencing low inventory levels at sought-after price points. The report noted that an influx of new properties in the spring will renew buyer interest and activity, however, chronic supply issues will most likely continue at the entry level to luxury.
“Equity continues to play a significant role in the marketplace, driving demand at the top end of the market,” said Alexander. “Although overall gains have been elusive in recent years, a good percentage of buyers who purchased in 2018 and 2019 are well positioned to make their next moves. For example, in the Greater Toronto market, buyers who purchased homes at an average price in 2018 saw equity rise by almost 43 per cent by the end of 2023 ($787,842/$1,126,591). These buyers are coming to the table with a larger downstroke and reduced risk from a lending perspective.”
The report noted that luxury home-buying activity is undergoing change as a younger demographic moves into the upper end of the market and that turnkey properties are most coveted.
The report also noted that the desire for more space and less congestion is an emerging trend yet again and that building activity is also making a comeback, with new construction on the rise in half of all markets that were examined.
According to the report, some luxury buyers looking to expand their purchasing power are moving over into markets such as London (drawing buyers from the Greater Toronto Area, Halifax, Calgary, Edmonton and Saskatoon.
The report noted, however, that activity among foreign buyers has fallen drastically since the introduction of the Foreign Buyer Ban by the Federal Government in January 2023, which it extended through to 2027.
“While the idea of a Foreign Buyer Ban sounds good in principle, it makes less sense in practice,” said Alexander. “The ban was originally intended to make a greater number of properties available to Canadians and reduce upward pressure on housing values. The Bank of Canada’s 10 rate hikes were all that was needed to achieve that objective, all the while supply remains at historical lows.”
According to the report, condo activity was strongest in Metro Vancouver, where sales climbed close to 70 per cent in the first two months of the year.
“Buyer enthusiasm is evident as the spring market ramps up,” said Alexander. “Yet, despite the uptick, we’re still seeing some factors constraining sales at luxury price points. Most significant is the tax implications at the uber-luxe levels, which have been weighing down the segment, particularly in the Greater Toronto Area.”
“Assuming a continuation of current economic fundamentals, momentum is set to climb at luxury price points from coast to coast,” says Alexander. “With recent inflation numbers coming in lower than expectations at 2.8 per cent, the possibility of further improvement in interest rates only strengthens growing optimism. Yet, there is an air of caution as the challenges of recent years remain fresh in the minds of buyers and sellers. Confidence is building, with the light at the end of the tunnel clearly visible. Demand is coming from a mix of high-income professionals/executives, retirees, empty-nesters, Gen X and millennials, newly landed immigrants, as well as large and multigenerational families – a good sign, as the diversity of buyers at the top end of the market today bodes well for its overall health in the future.”