Three of the largest Canadian cities saw significant drops in luxury real estate transactions last year. Toronto, Calgary, and Vancouver luxury real estate all went through a downturn and experts are weighing in on the potential causes.
National Grounds for the Sharp Decrease
Luxury housing sales have declined in Canada’s largest urban areas, according to a recent report by Sotheby’s International Realty. The news did not come as a surprise, and experts point to several reasons for the decrease, including two of the most often talked-about real estate topics of last year: higher interest rates and more challenging mortgage guidelines.
However, these two factors alone are not the sole reasons for the drop. The study points to other issues that have specifically impacted high-end property transactions, including tighter supply and strained economic conditions derived from low crude-oil prices.
A Closer Look at Local and Provincial Regulations
While the above factors affect Canada as a whole, there were also several local or province-level changes that appear to have had an impact.
For example, the BC government raised taxes for foreign buyers to 20% and expanded the geographical area which they covered. They also increased school taxes for homes worth more than $3 million and added new taxes on both speculation and empty properties.
Additionally, the real estate market in Vancouver continues to experience increased consumer anxiety, as homebuyers worry about the unintended outcomes of all these government initiatives.
By the Numbers: How Much Luxury Prices Fell
The report looked at the Vancouver, Toronto, Montreal, and Calgary luxury real estate sectors. It found that the number of $1 million+ homes transacted dropped 26% in Vancouver compared to 2017, and the number of homes that sold for more than $4 million went down nearly 50% in the same period.
Calgary’s reduction in sales of homes priced at more than $1 million was a more modest 10%, but the city only sold a single home for more than $4 million during the year.
As for the Toronto luxury real estate market, $1 million+ home sales were down 31%, while $4 million+ properties decreased by 40%. In the city proper, homes selling for $1 million and up declined 19% and there was a 39% drop in homes selling for more than $4 million.
There was one notable exception in the report: Montreal luxury real estate. The city saw a 20% boost in homes sold for more than $1 million, though sales for more than $4 million fell 8%.
The Numbers Are Not as Dramatic as They Seem
Just looking at the numbers, it’s easy to worry about the state of luxury home sales in these large cities. The dramatic drops may seem worse than they really are, though, thanks to soft sales in the first quarter of 2018—when several housing policy changes came into effect—and the record-setting performances at the beginning of 2017. For example, Toronto’s luxury market went up in the second half of 2018, which may point to its eventual revival.
It’s also worth noting that the luxury condo market continues to boom on a nationwide level, thanks in part to other luxury properties being priced too high for many to have a hope of buying them.