After the recent drop in sales of luxury properties across Canada, observers are predicting that 2019 will bring modest increases in sales volumes and prices in what remains a buyer’s market.
“Real estate markets across Canada are facing a headwind,” says Brad Henderson, president and chief executive officer of Sotheby’s International Realty Canada. Taking the blame are tightened mortgage guidelines, foreign-buyer taxes and higher interest rates. “Certainly there has been a significant decrease in activity everywhere.”
A report released by the real estate brokerage last month showed that Vancouver, Toronto and Calgary saw large drops in the sales of high-end real estate in 2018 as sellers moved to the sidelines. In Vancouver, the number of homes that sold for $1-million or more was down 26 per cent, and those priced at $4-million and more fell 49 per cent.
In Calgary, sales of homes priced at $1-million or more fell 10 per cent, while in the Greater Toronto Area they declined 31 per cent and sales of homes worth $4-million or more fell 40 per cent.
Mr. Henderson says that as consumer anxieties persist and restrictive government measures continue, such as last year’s increased school taxes as well as new taxes on speculation and empty homes in overheated Vancouver, “we expect the market is going to move more toward the buyer’s side of the equation.”
He expects that any downward pressure on prices “is going to be quite modest,” however. He predicts that all cities but Vancouver will experience increases in the low single digits, especially amid low inventory. With interest rates remaining steady, he feels that buyers and sellers will become more confident and “the situation can turn around quickly.”
One reason for low sales volumes among high-end properties in Toronto is that “there are a lot of people sitting on luxury homes” because there are few three-plus-bedroom luxury condos that down-sizers can move to, says Trish Bongard Godfrey, a sales representative at Chestnut Park Real Estate Ltd.
Potential move-up house buyers thus aren’t finding enough to choose from in the $3- to $5-million range. “These aren’t just looky-loos, these are people with agents who are going in to check things out,” Ms. Bongard Godfrey says. “We’re in a bit of a gridlock.”
According to the Toronto Real Estate Board, in December the average detached home in central Toronto sold in 34 days for $1.8-million.
‘BUYERS FEEL THEY CAN NEGOTIATE NOW’
Even so, prices of detached homes in central Toronto are down almost 13 per cent from December of 2017. She advises sellers of luxury properties to “be very careful about pricing to the market and leave a little wiggle room, because buyers feel they can negotiate now.”
Prices in Vancouver have contracted as much as 30 per cent for detached homes as a result of rising interest rates, tougher mortgage qualification rules and higher foreign-buyer taxes, says Faith Wilson, principal of Faith Wilson Group – Christie’s International Real Estate. Ultra-elite buyers are not necessarily affected by such factors, she says, but they can have an impact on overall confidence levels.
“We’re seeing some activity in the market now on all levels, and that’s positive,” Ms. Wilson adds, noting that “it’s a great time to be a buyer.”
For sellers, “the fact that interest rates didn’t go up was a little bit of a bright spot,” she says, and there is talk of a change in the mortgage stress-test levels. “I think we’re in for some stability in the market now.”