Canada's luxury home market running hot and cold, Sotheby's says
Toronto and Vancouver seeing high demand, Calgary market crumbles under drop in oil
Canada's luxury home market is either hot or cold — depending on where you live.
A biannual study of luxury homes — those worth more than $1 million — in four of Canada's largest cities found two very different results.
While luxury real estate is going gangbusters in the markets of Toronto and Vancouver, million-dollar home sales in Calgary are crumbling under this year's unexpected drop in oil prices.
That's according to Sotheby's International Realty, which authored a report published Thursday.
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In Toronto, luxury home sales surged 56 per cent between January and June of this year, compared to the same period in 2014. In Vancouver, sales of similar homes jumped 48 per cent.
Sales in Montreal rose a more modest 20 per cent.
Nestled between those cities, though, exists an opposite trend. Sales of $1-million homes in Calgary fell 36 per cent compared to the first half of 2014.
Sotheby's says despite seeing several years of record-breaking numbers in Calgary, the oil price crash has created economic uncertainty and bruised consumer confidence, keeping Calgarians out of the luxury home market this year.
Aside from ultra-low interest rates and interest from abroad, the reason for surging sales in Toronto and Vancouver, according to Sotheby's, is high demand for single-family homes and, with it, tight supply. The numbers suggest many homebuyers competed in price wars. For example, 55 per cent of $1 million to $2 million in Vancouver sold above their listing price in first half of 2015.
There were also more Canadians shopping for the 'attached' luxury home. Sales of town homes, semis and duplexes in the $1-million-to-$2-million range skyrocketed 109 per cent in Vancouver, 70 per cent in Toronto, and 32 per cent in Montreal.
The luxury condo market also gained momentum in all three cities, with Toronto leading the country in sales.
In another recent report, Sotheby's said Canada's hot luxury home market was driven by baby boomers, who are choosing to upsize to more expensive homes rather than downgrade. They're also helping their kids out with down payments on their homes.
These latest figures come amid growing concerns over Canada's housing market, and the overall indebtedness of Canadians. More and more economists expect the Bank of Canada to cut interest rates further next week, which would likely encourage more borrowing.
As Derek Holt, vice-president at Scotia Economics, recently warned, another cut would "risk inflaming housing imbalances" which the Bank of Canada has already said is a top risk to the domestic economy.
The cost of luxury rising
The report also showed in Toronto and Vancouver, achieving 'luxury' status is getting pricier. Industry experts now estimate the entry point for a luxury detached single-family home in Toronto is $2 million. In Vancouver, it starts at $3.5 million.
When measuring the luxury markets, Sotheby's looked at sales volume, average days on the market, and percentage of properties sold over the asking price for condos, attached homes and single-family homes.