Sotheby's reports that performance is diverging across major markets
Canada’s luxury real estate markets remain generally resilient but new figures show diverging trends across the four largest metropolitan markets.
It’s often said that ‘all real estate is local’ but that has been less true among Canada’s higher-end residential property markets which have seen an era of national performance trends, certainly over the past 12 months.
According to a new report from Sotheby’s International Realty Canada, while interest rates are affecting all areas, hyperlocal housing supply and consumer sentiment is driving the less uniform performance of the largest luxury housing markets.
The report highlights how legacy financial planning and generational wealth transfer has helped maintain the top-tier housing market.
But as well as geographically, divergency is also seen between the luxury market (homes of $4 million and above) and ultra-luxury markets ($10 million and above).
In the first six months of 2023 sales of luxury homes were down 18% from the same period in 2022, while sales of ultra-luxury homes were up 38%. Housing shortages and mortgage rates saw residential sales over $1 million down 25% year-over-year overall in the first half of 2023.
“The Canadian luxury housing market has remained remarkably resilient despite the headwinds of multiple interest rate hikes and unpredictable economic performance, and the second quarter of 2023 marked a turnaround point for consumer activity,” said Don Kottick, president and CEO, Sotheby’s International Realty Canada. “Following a year-long period of reconsideration and recalibration, qualified and highly motivated real estate buyers and sellers emerged from the sidelines over the spring, driving a bounce back in luxury market activity.”
Regional variations
The GTA, Canada’s largest residential real estate market and including the City of Toronto with its important role in the Canadian economy and a frequent choice of immigrants, saw demand growth in the first half of 2023.
But supply issues meant that overall residential real estate sales over $4 million were down 32% year-over-year in the City of Toronto, where $1 million-plus sales were down 27% overall.
Overall, the GTA’s residential real estate sales over $4 million dropped 35% year-over-year from the first half of 2022 and residential sales over $1 million saw an annual decline of 29%.
For Montreal, overall $4 million-plus residential sales volume pulled back by 39% compared to levels seen in the first half of 2022, while residential sales over $1 million experienced a 28% annual decline.
Meanwhile, Calgary’s immigration and real estate investment from other parts of Canada helped overall residential real estate sales over $1 million and $4 million fare better, with nominal 10% and 20% declines in the first half of the year, respectively. However, the city’s luxury condominium market rebounded, as $1 million-plus sales doubled with a significant 100% gain from 2022 levels.
Vancouver was the star performer though in the first half of 2023. Although luxury residential real estate sales over $4 million fell 18% short of sales volume in the first half of 2022, residential sales over $10 million rebounded a significant 38% year-over-year.
“Vancouver and Toronto’s urban luxury single family home markets experienced some of the most pronounced improvements in spring activity; however, inadequate supply continued to frustrate potential sales and to undermine the housing needs of locals,” added Kottick. “Over the past few years, Calgary has emerged as one of Canada’s most upbeat luxury real estate markets, and in the first half of 2023, its condominium market surpassed expectations with annual percentage sales gains that outstripped other major cities’ performance. In contrast, Montreal’s luxury market is rebalancing to accommodate negotiation and conditions that skew in favour of buyers, particularly in the city’s condominium segment.”
