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Luxury Home Values in the Majority of Regions Across Canada Grow in 2018, Despite Headwinds Created by Several Residential Real Estate Policies

  • Greater Toronto Area’s luxury home price appreciation flat after two rounds of government intervention, while luxury condos make largest price gain

  • Good value drives demand for luxury detached homes in the Greater Montreal Area while high inventory in luxury condos limits price appreciation to 3.9 per cent

  • Calgary luxury condominiums buck the trend posting only year-over-year price decline

  • British Columbia’s 2018 budget dampens demand in Greater Vancouver’s luxury real estate market, ushering in buyer’s market

  • Consumer confidence releases pent up demand in Ottawa’s luxury home market as price appreciation show healthy gains

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    TORONTO, May 10, 2018 – Canada’s spring luxury real estate market is well underway in Canada’s largest cities. While sales in Greater Vancouver and the Greater Toronto Area (GTA) are significantly down in the first four months of the year, luxury home prices have remained relatively resilient, according to Royal LePage.

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    Overall, sales activity declined in Greater Vancouver and the GTA luxury real estate market as both sellers and buyers adjusted to federal and provincial measures affecting both domestic and foreign buyers. The introduction of the new mortgage stress test implemented by the Office of the Superintendent of Financial Institutions (OSFI) at the beginning of 2018 created market turmoil as buyers moved to the sidelines in order to gauge the impact on luxury home prices, similar to what was witnessed in the overall residential resale market. More significantly, in British Columbia, the 2018 provincial budget included policies targeting foreign and domestic buyers who do not pay tax in the province, as well as a tax increase for all homes over $3-million through increases to the property transfer and school tax. Similarly, the non-resident property tax included in Ontario’s 16-Point Fair Housing Plan dampened price expectations for the GTA region.

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    “Home prices in Canada’s luxury real estate market have remained remarkably resilient when you consider the economic headwinds that serial government interventions have created,” said Phil Soper, president and CEO, Royal LePage. “The resilience of home values reflects the strong aspirations of luxury buyers to reside and work in cities that are consistently ranked among the most desirable on the planet.”

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    During the first four months of 2018, price appreciation of a luxury condominium in Greater Vancouver and the GTA outpaced that of a luxury detached home, with median condominium prices rising by 7.0 per cent and 10.4 per cent year-over-year, respectively. For the same period, the median price of a luxury condominium in the Greater Montreal Area and Ottawa rose by 3.9 per cent and 4.0 per cent, respectively, while Calgary posted the only decline, decreasing 6.1 per cent.

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    The Greater Montreal Area posted the largest year-over-year price gain in the detached luxury home segment, increasing 9.1 per cent to $1,569,515 in the first four months of the year. During the same period, detached luxury homes in Ottawa (6.3%) and Greater Vancouver (5.2%) also saw prices rise, while home values in Calgary (0.6%) and the Greater Toronto Area (-0.2%) remained flat.

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    “Somewhat unusual in historical terms, and reflecting an important demographic shift happening across North America, appreciation in the luxury condominium market is outpacing the traditional target for large value residential property investment, the detached house,” said Soper. “Baby Boomers are finally exiting their large family homes, and luxury condos, with their low maintenance lifestyles, are the favoured destination.

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    “Contrary to popular belief, wealthy homebuyers are price sensitive too. They didn’t reach the point in their lives where they have the capacity to acquire high-value real estate without being financially astute,” concluded Soper. “Luxury condominiums represent value in today’s market.”

    Spring 2019 Forecast

    The momentum behind luxury condominium price growth is forecast to continue through the year and into the 2019 spring market in all cities surveyed, with the exception of Calgary. When broken out by region, the median price of a luxury condominium in the GTA is forecast to post the largest price gain, rising 8.0 per cent to $1,847,194 in the first four months of 2019 when compared to the same period in 2018. Over the same timeframe, luxury condominiums in both Ottawa and the Greater Montreal Area are forecast to increase 3.0 per cent. Calgary is the only city surveyed that is expected to see the median price of a luxury condominium dip in spring 2019 when compared to 2018, decreasing 4.0 per cent year-over-year.

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    Detached luxury home prices in Greater Vancouver are forecast to decline in the first four months of 2019,

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  • decreasing 3.0 per cent year-over-year to $5,619,153, while properties in this segment in the GTA are estimated to remain flat (0.0%) over the same period. The Greater Montreal Area and Ottawa are both forecast to increase 5.0 per cent year-over-year, and detached luxury homes in Calgary are expected to rise 2.0 per cent during the same period. 

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    Greater Vancouver 

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    British Columbia’s 2018 budget dampens demand for luxury real estate in Greater Vancouver, ushering in a buyer’s market 

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    Despite a sharp decline in sales activity, some price gains made during last year’s luxury spring market carried through to the start of 2018. For the first four months of the year, the median price of a luxury detached home in Greater Vancouver rose 5.2 per cent year-over-year to $5,792,941, while the median price of a luxury condominium rose 7.0 per cent year-over-year to $2,503,873 during the same period.

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    “The price appreciation that we are witnessing in Greater Vancouver’s luxury market this spring is largely a result of momentum being carried over from 2017,” said Soper. “In light of recently announced provincial tax policies to both foreign and domestic buyers purchasing homes in the Vancouver region, price appreciation in the luxury market is expected to decline in 2018 while sales volumes are expected to continue to be lower than recent norms.”

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    Looking ahead to the 2019 spring market, the median price of a luxury detached home in Greater Vancouver is forecast to decrease 3.0 per cent to $5,619,153, when compared to the first four months of 2018. In contrast, luxury condominiums are forecast to increase 2.0 per cent to $2,553,950 during the same period.

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    “Right now we are witnessing several factors insulate condominiums from the price declines we are seeing in the detached home market,” said Brock Smeaton, sales representative, Royal LePage Sussex. “Younger luxury buyers prefer condos for their affordability and little upkeep, while baby boomers increasingly prefer them as a downsizing option. Of course, this demand also catches the eye of investors who see rental opportunities.”

    During the first quarter of 2018, sales of detached luxury homes decreased 38.2 per cent compared to the same period in 2017, while luxury condominiums decreased 26.5 per cent[3].

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    “While Greater Vancouver’s luxury detached home market is showing year-over-year price appreciation, it is on a downward trend as the region continues to recover from policy announcements both within and outside Canada,” said Smeaton. “The region has seen less interest from foreign buyers since China tightened its policies on wealth leaving the country. More recently, the OSFI mortgage stress test and the 2018 B.C. budget, which contains a speculation tax as well as an increase to the property transfer tax and school tax for all homes over $3 million, will significantly affect foreign and domestic buyer activity in 2018.”

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    Smeaton added that the long-term outlook for luxury detached homes is positive for the region.

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    “Vancouver is one of the greatest cities in the world and while developers can create space to build a luxury condo, the opportunity to build detached luxury homes is limited because of the mountains,” said Smeaton. “For many local buyers who were only on the cusp of accessing the luxury market a few years ago, this unexpected relief in the market is a welcomed opportunity.”

    Luxury real estate segment price appreciation in Canada’s five largest cities (.pdf)

 

 About the Royal LePage Carriage Trade Luxury Properties Spring Market Release


The Royal LePage Carriage Trade Luxury Properties Spring Luxury Market Release provides information on the two most common types of luxury housing in Canada using lower thresholds of three times the median value of each segment relative to the overall property type’s median home value in that city. Housing values use company data in addition to data and analytics from its sister company, RPS Real Property Solutions, the trusted source for residential real estate intelligence and analytics in Canada. Commentary on housing are provided by Royal LePage residential luxury real estate experts, based on their opinions and market knowledge.

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    Lower thresholds used for detached luxury homes: Greater Toronto Area ($3,046,206), Greater Montreal Area ($1,187,118), Greater Vancouver ($4,630,147), Calgary ($1,660,794), and Ottawa ($1,358,179). Lower thresholds used for luxury condominiums:  Greater Toronto Area ($1,454,446), Greater Montreal Area ($993,259), Greater Vancouver ($1,926,084), Calgary ($849,463), and Ottawa ($900,911).

    About Royal LePage

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    Serving Canadians since 1913, Royal LePage is the country’s leading provider of services to real estate brokerages, with a network of close to 18,000 real estate professionals in more than 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting shelters for women and children as well as educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbol TSX:BRE.

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    For more information visit: www.royallepage.ca.


     

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