Luxury home sales and prices have fallen across the country. And that’s particularly true in previously hot markets such as Vancouver and Toronto. The culprit behind that drop surprises no one. The 2018 mortgage stress test, and the Bank of Canada’s increase in interest rates played a roll.
“All markets in Canada have faced the same headwinds from interest rates and stress testing,” said Sotheby’s Canada CEO Brad Henderson. You can read all about it in Sotheby’s newly released 2019 Top-Tier Spring Outlook.
The report claims that conditions are becoming more favorable for the luxury market in the country’s two largest real estate markets. In fact, it states that we may even see the changes as early as Spring 2019.
Sotheby’s predictions on luxury home sales in the GTA
The GTA’s luxury market is primed for a return to form. This is in part due to growing demand, not enough inventory, a growing population and revitalized consumer confidence. In fact, preliminary data shows that the GTA’s luxury home market finally stabilized in January and February of 2019. Sotheby’s expects 2019 sales activity to surpass 2018 level.
MLS reports a 38% drop in sales from January to February 2019 on a year-over-year basis. However, this doesn’t account for a shift in the luxury market from traditional methods to off-market and private channels.
GVA indicators point to growth in luxury home sales
All real estate markets across the country took a heavy hit thanks to the mortgage stress test. But the Greater Vancouver Area was especially affected. The implementation of B.C.’s foreign investor and speculator taxes placed the GVA squarely into buyer’s market territory.
As Vancouver continues to evolve into a world-class city, buyers desire for luxury real estate remains. Sotheby’s report claims that there are strong indicators that home buyers and sellers are on the brink of jumping back into the luxury home sales market. More and more buyers are showing up to open houses, and real estate agents are reporting an increase in property inquiries.
But there is a possibility that Vancouver’s government may implement new supply-side regulations, such as amending the Empty Homes tax. There’s plenty of market uncertainty still, keeping buyers and sellers in the sidelines
“We believe that there’s a closer alignment between buyers and sellers in terms of what prices are,” said Sotheby’s Canada CEO Brad Henderson. “Hopefully the governments are going to resist the temptation to add additional policy measures because they could bring about the exact same thing they’re trying to avoid, which is a significant correction in the marketplace.”