Luxury home markets slumping in Toronto, Vancouver, reports conclude

The market for luxury homes is slumping in Canada's two premier housing markets, a pair of seperate reports found Thursday.

Sales plunge, but prices manage to hold steady for now

While prices are managing to hold steady, sales of luxury homes in Toronto and Vancouver have plunged in the past year. (Sotheby's International Realty Canada )

The market for luxury homes is slumping in Canada's two premier housing markets, a pair of separate reports found Thursday.

Royal LePage says that the sale of luxury homes — which the real estate firm defines as being ones worth three times the average price in the local market — plunged by more than a third in Vancouver in the first three months of the year.

In Toronto, the decline was even more dramatic — down by more than 60 per cent compared to early 2017.

Recent rules changes to implement a stress test created "market turmoil," Royal LePage said, "as buyers moved to the sidelines in order to gauge the impact."

There were other factors at play in the two markets too, as Ontario implemented a crackdown on foreign buyers in the spring of 2017 that continues to put a damper on the market. And British Columbia's 2018 provincial budget made things tougher for foreign and domestic buyers who do not pay tax in the province, as well as as slapping a new tax increase for all homes worth more than $3 million.

While sales figures plunged in both cities, on the price side the picture looked a little better.

In the Toronto area, the average price of a luxury home fell by 0.2 per cent in the past year to $3,522,117 in the first quarter of the year. In Vancouver, the average luxury home sold for $5,792,941 in early 2018, up five per cent in compared to 12 months earlier.

In both cities, luxury condos fared better than the overall market, up 10 and 7 per cent, respectively, compared to 2017's level. 

"Home prices in Canada's luxury real estate market have remained remarkably resilient when you consider the economic headwinds that serial government interventions have created," Royal LePage CEO Phil Soper said.

"The resilience of home values reflects the strong aspirations of luxury buyers to reside and work in cities that are consistently ranked among the most desirable on the planet."

International ranking slips

A separate report published Thursday shows that while the Toronto and Vancouver are still desirable among the world's financial elite, their status is slipping a little in terms of prime real estate.

In a quarterly report from British real estate consultancy Knight Frank looking at the top five per cent of residential properties in some of the world's top cities, Toronto's luxury housing market was ranked 18th in the world in the first quarter, behind Frankfurt but just ahead of Brisbane.

Vancouver was ranked 31st, ahead of Rome but just behind Milan.

Both cities saw their ranking slip from where they were three months earlier, and the market direction for both is headed lower, Knight Frank said.

"The market above $3,000,000 has already been quiet in Metro Vancouver," said Kevin Skipworth of Dexter Associates Realty, Knight Frank's partner in the region. "We have seen sales rates soften in the last two years, even prior to the introduction of the original foreign buyer's tax in August 2016."

Seoul, Cape Town and Guangzhou finished in first, second and third place on Knight Frank's list.