Luxury housing market also aided by strong equity returns converted to real estate
The Bank of Canada will announce its first interest rate decision of 2025 later this month but its previous cuts have had a positive impact on one of Canada’s key luxury housing markets.
Easing rates along with subdued prices in the Greater Toronto Area has fuelled a rebound for the region’s luxury housing market according to new data from RE/MAX Canada with a 41% year-over-year rise for sales of homes sold for $3 million or more – 58% in the City of Toronto.
In the fourth quarter of 2024 there were 364 homes sold at or above this threshold, up from 259 in the same period of 2023. For homes of $5 million and above there were 84 sales versus 54 a year earlier, a 59% increase; and for homes sold with a price tag of at least $7.5 million, 24 were sold, up 41%. Sales above $10 million were unchanged at 11.
“The impact of the first and second 50-basis-point rate cuts by the Bank of Canada radiated throughout the GTA in the fourth quarter, jumpstarting demand for high-end properties both within the city and suburbs,” says RE/MAX Canada president Christopher Alexander. “We’ve been expecting a surge in top-tier sales activity as the economic climate and corresponding pause in buying intentions prompted a build-up in pent-up demand. The fourth quarter did not disappoint.”
Looking at whole-year stats, the number of luxury homes was up 4% year-over-year in 2024 with 1,513 sold in the GTA for $3 million or more. The percentages are higher at the more expensive end – 21% for $5 million or more, 18% for $7.5 million or more, and 17% for those priced at $10 million or more.
“The momentum in the luxury segment has outpaced the overall market in 2024,” added Alexander. “Affluent buyers appear to have acclimatized to Toronto’s higher land transfer tax structure, which went into effect on January 1, 2024. The initial shock of the tax hike has likely subsided, and purchasers are simply treating it as the cost of doing business. That said, nearly half of the high-end sales over $5 million reported by TRREB occurred on the outskirts of the city. Last year, sales in the 905 represented just 36 per cent of luxury homebuying activity.”
Paper wealth to material wealth
The GTA luxury housing market has also been aided by wealthy buyers enjoying the results of their financial investments.
With equities delivering returns for investors in both domestic and US stocks, this provided capital for homebuyers to put into real estate assets.
“Profit-taking was widespread at year end, with many stakeholders converting paper wealth to material wealth,” explained Alexander, noting the scenario was playing out south of the border as well with luxury real estate rebounding in top tier US markets including Miami, New York, Los Angeles and San Francisco in the final quarter of 2024.
But does the strength of the GTA luxury market at the end of 2024 mean good times ahead for those looking to sell in 2025?
“The uptick in home-buying activity sets the stage for a strong luxury market in 2025,” Alexander said. “After several years of softer sales at higher price points, affluent buyers have the confidence to move forward once again. Supply has been a considerable factor hampering strong buyer intentions and we expect that to continue. While we do expect to see more listings come on stream, they’re being offset by the increase in buyers moving off the sidelines.”
Alexander adds that 2025 could surpass the sales seen in 2024, but there are potential headwinds.
“Growing optimism among buyers is evident with robust equity markets and lower interest rates. With Canada Mortgage and Housing Corp. extending insurance coverage to $1.5 million for first-time purchasers, the ripple effect is expected to carry through to all price points, including the top end, as younger buyers return to the housing market,” he said. “The wild card, in addition to inventory might be how the political picture evolves with the anticipated change in leadership in both Canada and the US.”
