The luxury real estate market in any country is going to by and large exist as its own separate market entity. That’s simply because those types of properties and accommodations are not in any way in line with what most average people can afford, or would choose to afford even if they could. People tend to buy homes exclusively on the criteria of what fits them and their family, and it is fair to say that the majority of luxury real estate buyers are making their decision purchases well beyond that.
Nonetheless, there is economic significance in it for the market and you also won’t find a single real estate agent who’s not keen to be listing a home that’s going to have multi-million dollar offers coming in on it. These types of listings and sales have always been available to a very small section of the purchaser demographic, and in truth it’s fairly standard that only certain realtors get a slice of that pie too. But it seems that may changing, on one end at least.
There is reason to believe that luxury real estate is following the general trend for the market in Canada where dropping median values can’t help but make it more of a buyer’s market. We’ll make that the focus of this week’s blog entry, but first we’ll mention as well that realtors who need a helping hand with generating clients of any sort – luxury real estate or otherwise – can take advantage of our online real estate lead generation system here at Real Estate Leads and have the power of Internet Marketing doing wonders for their new-client generation efforts.
Back to topic, let’s look at what is supporting this newer assertion that luxury real estate in Canada is becoming a buyer’s market.
Pandemic Recovery Connection
Sotheby’s is an International Real Estate Firm, and a report from their Canadian office is suggesting that luxury real estate may be shifting into buyer’s market conditions this year. It states that prices are readjusting from pandemic-related upheaval, and there is also some suggestion that the new federal government foreign buyer’s ban will also take some very-qualified buyers out of the picture to further cool prices somewhat.
The belief is that buyers and sellers retreated from the luxury market in 2022 as the housing market flexed with interest rate hikes, high inflation, and regulatory challenges, and this set the stage for prices to cool this year despite demand for housing continuing. This is countered by the fact of course that demand for luxury housing is never going to exist to the same extent that it does for more conventional housing. Some of these buyers will also have a greater interest in property and buyers are always going to have their own individual prerogatives when it comes to buying and selling real estate.
What we do know is that luxury housing segments in some Canadian metropolitan areas were approaching buyer’s market conditions by the end of 2022, or were already in that territory well in advance of that. Many industry insiders are predicting another adjustment with regards to pricing coming in the first half of 2023 here.
It is likely that we may be at a point now where home sellers are starting to realize the impact of the changing market on the market values of their properties, and that pricing is going to start to shift because of it. It is possible that this may unlock certain opportunities for buyers and those looking to up-size and purchase a home that is more in line with what they envision for themselves.
Luxury Sales Down Year-Over-Year
Sotheby’s report found luxury sales fell year-over-year in major Canadian cities. For the GTA, residential real estate sales over $4 million went down nearly a quarter from 2021 to 2022, and homes that sold for over $10M fell 29%. It was in Vancouver that the sharpest decline in high-end real estate sales was seen, particularly in the first quarter of the yea. Sales of residential properties over $4 million fell by 30% as of the end of 2022 and homes that changed hands for $10 million+ dropped 46% from 2021 levels.
It was more tempered for Montreal, with residential sales over $4 million close to 2021 levels and an 18% annual decline in sales activity for homes over $1 million. The outlier of sorts was Calgary, with sales of homes over $1 million going up 16% from 2021 to 2022. Sales over $4 million increased by nearly half, with six properties selling in that price range. Higher rates of inter provincial migration almost certainly contributed to growing demand for this type of housing.
We’ll conclude by saying that housing deficits will continue to challenge housing markets in major cities in 2023. Yes, prices will go down, but pent-up demand and immigration population gains will continue to prop up housing values in the long term.
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