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Toronto Luxury Real Estate Update – Sales Down, But Condos Gain Momentum in Correcting Market

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Toronto Luxury Real Estate Update – Sales Down, But Condos Gain Momentum in Correcting Market
3 min. read

Key takeaways:

  • GTA housing cools off
  • Luxury sales languish in the summer heat
  • Mansions passé, luxury condos in
  • Foreign buyers’ tax takes hold
  • Interest rate hikes and the outlook

As sales plummeted after the launch of Ontario’s new Fair Housing Plan, the uncertainty of Toronto’s housing market did not spare the luxury segment, which, like other segments, registered significant slowdown. Moreover, luxury homes have also been more significantly impacted by the non-resident speculation tax, meant to curb foreign investment-driven transactions.

GTA housing cools off

Meant to cool down the unsustainably overheated market conditions of early 2017, Ontario’s Fair Housing Plan launched in April, amid wide-ranging controversy. The 16-point plan kicked off a period of market uncertainty that saw sales plummet. According to Toronto Real Estate Board data, August sales were down 34.8% year-over-year across the GTA, although the average price still managed to inch up 3% to a current $732,292. In fact, Ontario’s shaky real estate market is already affecting national housing indicators, with 2018 expected to bring national sales 2.3% below 2017 numbers, per The Canadian Real Estate Association.

Luxury sales languish in the summer heat

Although the first half of 2017 ushered in a 41% year-over-year sale activity hike, the post-Fair Housing Plan summer months – already traditionally more restrained due to buyer behavior – saw market activity drop at sharp rates, according to a new report by powerhouse Sotheby’s International Realty.

Year-over-year luxury home sales fell by 39% in the GTA during the summer, while properties over the $4 million mark sold at a 29% slower pace. Although slightly less affected, Toronto’s luxury real estate segment also experienced markedly less activity, with sales down 37% for properties over $1 million, while homes over the $4 million mark sold at a 33% slower rate.

Mansions passé, luxury condos in

Buyers’ shifting preference towards condos over detached homes was an increasing trend among luxury properties – detached single-family home sales slumped 37% in the City and 44% in the GTA. Market activity among listings priced $4 million and over also dropped by roughly a third throughout the area. Condominiums, however, significantly boosted overall market indicators, with August sales down a mere 11% in the GTA, and 6% in the 416 compared to year-ago figures.

Foreign buyers’ tax takes hold

One of the most controversial measures in Ontario’s new housing policies is the much-debated non-resident speculation tax (NSRT), which adds a 15% land transfer extra fee for residential purchases of up to 6 units. Thanks to its strong economy, high-quality education system and a bevy of other factors, Toronto is considered the 4th most livable city globally, with a strong non-resident presence, especially in the top-tier real estate sector.

Recently released data by the Ministry of Financing showed a significant decrease in foreign buyers, with only 3.4% of all sales in the Greater Golden Horseshoe (GGH) region involving at least one non-foreign buyer. Prior to the new government’s measure taking effect, 4.7% of all GGH sales involved non-residents. Toronto felt the measures at an even greater level, with non-resident purchases dropping from 7.2% to 5.6% of all sales.

Interest rate hikes and the outlook

Although the new hike announced by the Bank of Canada has brought the key interest rate to 1%, Sotheby’s expects it to have minimal effect on top-tier market activity. Although market conditions remain in transition, the new interest rate hikes – with another one over the horizon – a stable economy, global appeal, and new supply expected to grow in the fall season, Toronto’s luxury real estate market is forecasted to regain momentum, although market conditions will be nowhere near the sales and price boom frenzy of early 2017.  

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