Toronto leads a robust luxury real estate rebound, according to a new data compiled by Sotheby’s International Realty Canada. The report reviews sales data compiled from the first six months of 2021. It offers insight into Canada’s luxury ($1 million-plus, $4 million-plus and $10 million-plus) condominium, attached home and single-family home markets in Vancouver, Calgary, Toronto and Montreal.
Related: TRREB: Pent-up property demand looks to have been satisfied but condo sales still see gains
The headline-makers in the Sotheby’s report: $1 million-plus residential sales increased 217% year-over-year in the Greater Toronto Area. In Vancouver, during the first half of 2021, residential real estate sales were up 107% year over year. Thirty per cent of properties sold over $1 million in Montreal did so above list price. That’s a new record for luxury properties in that city.
And in Calgary, single family home sales comprised 93% of all $1 million-plus transactions during the first half of 2021 (571 homes sold, a 230% increase from the previous year).
Canada’s best luxury website: Interview with Sotheby’s International Realty Canada CEO & President Don Kottick
Renewed confidence in Canada’s post-pandemic economic recovery bolstered gains. The Bank of Canada reported “robust” first quarter GDP growth for the country at 5.6%. The Conference Board of Canada projects a 6.1% expansion of GDP in 2021, with steady growth expected across every province.
And with low borrowing costs, housing demand combined with shrinking luxury real estate inventory are pushing those record levels of activity and rising prices. Incredibly, sales over $4 million (condos, attached and single-family homes) in the Greater Toronto Area were up 276% year-over-year. That included the sales of 15 ultra luxury homes of over $10 million over this period. Significant gains were experienced across all luxury housing types. Sales over $4 million for condominiums, attached and single family homes were up 88%, 400% and 290% year-over-year, respectively.
An interesting storyline to watch for in Vancouver is the condo market. Like in Montreal and Toronto, that segment slowed significantly last year. However over the first half of this year condo sales $4 million-plus sales scored a 138% year-over-year gain.
Before the pandemic, Montreal’s luxury real estate market was enjoying real momentum. The city was further establishing itself as a global luxury destination. Montreal’s $4 million-plus residential real estate sales rose 133% year-over-year in the first half of 2021.
Cautious optimism in Calgary
Gains in gas and oil prices, and broader vaccine distribution, points to more optimism in Calgary. Sales in the $1 million-plus residential real estate market rose 236% year-over-year, but growth was uneven across housing types. Activity bounced back in the single family and attached home categories (230% and 338% sales gains, respectively, year over year). But condo sales over $1 million were a small percentage of the luxury market. Only nine units sold in the first half of 2021.
Post-pandemic change in psychology when it comes to “home”
Regarding Luxury spoke with Sotheby’s International Realty Canada CEO & President Don Kottick to gauge his thoughts on the data:
What are your thoughts on how the pandemic re-defined the top-tier real estate market so far?
“The pandemic era reinforced the importance of ‘home’ and ‘space’ to a degree that has never been experienced. We expect this to have a lasting impact across many facets of the Canadian luxury real estate market. Perhaps most profoundly, there has been a major shift in the psychology of luxury real estate consumers and homeowners.
“The new reality is that as the perceived value of living space has increased, affluent buyers’ ‘willingness to pay’ for luxury real estate has increased exponentially. Affluent consumers are more prepared to invest in additional space and in next-level architecture and design, whether through upsizing, home renovations or home building. This is elevating the quality and pricing of housing in Canada’s most prestigious neighbourhoods, in many cases, permanently.”
Do you think there is any truth to the argument that perhaps coming out of the pandemic, this search for “security” also includes how the affluent invest their money, that money markets are too risky, and that real estate is more “secure”?
“The goal of risk mitigation through asset diversification into real estate is motivating the affluent to invest more heavily into real estate right now. Before the pandemic, financial markets had seen a decade-long bull market before experiencing significant volatility in 2020. Since the pandemic, the performance of every major stock index has been unprecedented and unpredictable.
“With continued uncertainty on the horizon for the stock market, Sotheby’s International Realty Canada has seen affluent clientele opt to invest more in real estate because they see the benefit of diversifying into hard assets in a time of potential inflation. As a result, we’re seeing people “upsize” their home choices, especially given the current low cost of borrowing.
“Astute buyers are purchasing additional properties for vacation or investment. In an effort to maintain a diversified portfolio, and also because the pandemic has made independent living at home all the more appealing, baby boomers and older adults are choosing to stay in their homes and renovate, or to reinvest proceeds from their home sale into a new home for themselves instead of cashing out of the real estate market altogether.”
Do you see anything that will topple the luxury real estate apple cart, so to speak? What are some of the potential factors that you see that can slow down what we are seeing?
“The fundamentals underpinning the Canadian market are sound, and it would take a severe and unpredictable event to disrupt local and global demand for luxury real estate in the mid-to-long term. The factors that are most likely to limit sales activity in the short term are top-tier inventory shortages in face of demand, and fatigue amongst buyers given repeated bidding wars and lack of options, which is prompting some to retreat to the sidelines, if only temporarily.”
I know I asked you this a few months back, but are you continuing to see upticks in international buyer interest, and do you anticipate more of that, another growth driver for the market?
“We have seen a significant uptick in international interest in Canadian real estate since the start of the pandemic and we expect this to increase in the future, particularly when travel restrictions start to the lift. Our country is set to welcome over 400,000 new permanent residents this year alone, most of them to major metropolitan areas like Toronto, Montreal, and Vancouver, and this will boost demand for conventional and luxury housing.
“We are also already seeing the return of Canadian citizens who have been living abroad, including the US, Hong Kong and the UK, who are now seeking the relative security and safety of Canada given the pandemic, as well as geopolitical unrest worldwide. Some are moving back now, while others are buying homes or vacation properties given plans to return in the future.
“Canadian real estate also continues to be a highly desirable asset for foreign investors seeking financial diversification and security in a country that is renowned for our stability and safety.”