Top Tier Real Estate: Fall 2022 State of Luxury Report
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Canada’s luxury real estate market continued to recede from anomalous historic highs over the third quarter of 2022, as top-tier inventory faded across key metropolitan areas. As multiple interest rate hikes, surging inflation, financial market volatility and forceful geo-political headwinds impacted the market, prospective real estate sellers and buyers responded by temporarily retreating to watchful and strategic positions on the sidelines. Diminished top-tier real estate supply was magnified by a significant surge in summer travel that resulted in an exodus from the market, amplifying the housing market’s seasonal lull. The market also required time to adapt to the Bank of Canada’s succession of interest rate hikes, including a September 7 rate hike that saw the target overnight rate reach 3.25%, its highest level since early 2008 before the financial crisis. As a result, while underlying local demand for top-tier real estate and housing mobility remains unrelenting, the country’s major metropolitan real estate saw muted sales activity over the summer months and into the initial weeks of fall, with consumer sentiment and sales activity poised for further adjustment in the season ahead.
“Canada’s conventional and luxury real estate markets are undergoing a long-awaited transition after an era of over-exuberance during the pandemic, particularly in those regions that saw the most acceleration over the past two years. The market is still absorbing the effects of rapid-fire interest rate hikes, as well as changes in the domestic and global economic landscape, and real estate sellers and buyers are taking a step back to strategize,” says Don Kottick, President and CEO of Sotheby’s International Realty Canada. “It is critical to note, however, that the primary challenge within major metropolitan housing markets, particularly in Toronto and Vancouver, is a chronic undersupply of housing. Given high levels of local demand, population gains, as well as needs for housing mobility with changing lifestyles and generational needs, this foundational inventory shortage will support housing values and challenge affordability until the gap is closed. Demand-side policies and taxes, including bans and taxes on foreign buyers, will offer little benefit, while creating unintended consequences when Canada is striving to attract and retain people with desperately needed skills and talent.”
According to Kottick, prices are stabilizing across the conventional and luxury real estate market and prospective buyers and investors are no longer willing to pay bullish prices as was the case during the most frenzied days of the pandemic period. As a result, while properties priced correctly for current market conditions are seeing activity and sales, those priced too ambitiously are languishing on the market.
Market Highlights
Toronto
According to new data compiled by Sotheby’s International Realty Canada, luxury sales activity in Canada’s largest residential real estate market calmed from previous records in the third quarter of 2022, even as consumer confidence in long-term market fundamentals remained robust. As real estate listings inventory declined in premier neighbourhoods from July 1 – August 31 in the Greater Toronto Area (GTA), residential real estate sales over $4 million (condominiums, attached and single family homes) fell 42% year-over-year from the previous summer’s heated records. Three properties sold over $10 million on MLS, compared to six units sold above this ultra-luxury price point in the summer of 2022. Overall, residential sales over $1 million declined 39% year-over-year in the GTA in the summer months. Preliminary fall data foreshadows a tempered market ahead, as luxury sales over $4 million in the GTA were down 63% year-over-year between September 1–30 as the $10 million-plus market, which saw three properties sold last September, remained quiet on MLS. Overall residential sales over $1 million saw an annual decline of 52% in the month of September.
Vancouver
Sales activity in Vancouver’s luxury real estate market also cooled in the third quarter of the year, as prospective sellers and buyers paused in anticipation of further market adjustments, and as high-end housing supply evaporated from the market. From July 1– August 31, luxury residential sales over $4 million fell 51% from the record summer of 2021, with two properties selling over $10 million on MLS compared to one sold in the summer months of last year. $1 million-plus residential sales were down 37% year-over-year overall during this time. Luxury sales in the month of September signal a return to moderated levels of market activity, as residential sales over $4 million receded 58% from September 2021 levels, while sales over $1 million declined 70% year-over-year. The city’s ultra-luxury $10 million-plus market, however, remained active with two sales recorded on MLS between September 1–30 compared to one property sold in this price range during the same period last year.
Montréal
Montréal’s $4 million-plus residential real estate market, which saw sales volume increase 71% year-over-year in the first half of 2022 to new highs, gradually tapered to balanced conditions in the third quarter of 2022. From July 1–August 31, $4 million-plus residential sales remained relatively stable with a nominal decline to eight transactions compared to nine in the previous summer levels, while sales over $1 million were down 26% year-over-year. Luxury sales activity in the city in the month of September reflects a market coming into balance with two properties sold over $4 million between September 1–30 compared to six sold in September last year. Overall, September sales over $1 million were down 39%.
Calgary
Economic growth and diversification, a revitalized oil and gas sector, strengthening consumer confidence, and in-migration from other Canadian markets bolstered Calgary’s luxury market in the third quarter of 2022, positioning the city as an outlier amongst the country’s largest metropolitan markets. Residential sales over $1 million remained stable over the summer with a mild 12% year-over-year contraction in sales volume between July 1– August 31. One property sold over $4 million over the summer, on par with the number of sales above this price point in the summer of 2021. Preliminary fall sales activity also reflects an active market. In the month of September, sales over $1 million remained largely comparable with September 2021 levels, with sales tightening a negligible 5%.
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This article was originally published in Sotheby’s International Realty’s Insight Art of Living blog in October 2022.
*Disclaimer
The information contained in this report references market data from MLS boards across Canada. Sotheby’s International Realty Canada cautions that MLS market data can be useful in establishing trends over time but does not indicate actual prices in widely divergent neighbourhoods or account for price differentials within local markets. This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information and analysis presented in this report, no responsibility or liability whatsoever can be accepted by Sotheby’s International Realty Canada or Sotheby’s International Realty Affiliates for any loss or damage resulting from any use of, reliance on, or reference to the contents of this document.
