Sotheby’s International Realty Canada’s 2018 Fall Market Forecast

Sotheby’s International Realty Canada’s 2018 Fall Market Forecast

New data compiled by Sotheby's International Realty Canada show that the GTA real estate activity in the $1M+ category and the activity in the luxury segment, $4M+ are gaining traction. The number of sales rose by 19 per cent and 34 per cent year-over-year respectively.

According to Brad Henderson, President & CEO, Sotheby's International Realty Canada, Toronto's top-tier market is positioned for a turnaround this fall:

Since the introduction of Ontario’s Fair Housing Plan in April 2017, the market has maintained ground in spite of rapid policy changes, as well as rising mortgage rates and tighter lending guidelines. Market psychology has now adjusted and we expect the fall market to be more active. In contrast, high-end sales and prices are softening in Vancouver, not only in the single-family home segment but across the city’s heated condominium and attached home markets. In the upcoming fall market, it will be buyers and investors who will hold the upper hand.

Here are the key national influencers defined in the report:

  • Canada's economy had a good year—after a slow start, the economy expanded by 2.9 per cent in the second quarter of 2018. Good national economic fundamentals had a positive influence on Canada's top-tier markets.
  • The national unemployment rate and the unemployment rate in the metropolitan areas of Montreal, Vancouver and Toronto, continued to stay at record lows. Canada's unemployment rate hovered at 6% in August 2018, while Toronto's unemployment rate was 6.1 per cent.
  • The new mortgage stress test by OSFI which was introduced at the start of 2018 has affected the conventional market, but it had less of an impact on Canada's luxury real estate markets.
  • Affordability remains a critical factor in the top-tier real estate markets. The average single-family home benchmark price in the City of Toronto for August 2018 was $1.24 million. The rising prices are pushing buyers into considering entering condominiums and attached home sector. Fewer homeowners want to sell, because of the lack of viable housing alternatives.

Greater Toronto Area Top-Tier Market

The effects of the Ontario Fair Housing Plan and new mortgage lending rules and rising rates have started to wear off in the second half of 2018. SIRCA predicts "pent-up consumer demand coupled with renewed top-tier listing activity is expected to propel gains in sales, velocity and pricing across all housing segments to the end of 2018."

Usually, the market slows down during summer months, but top-tier sales had a great July and August. The sales volume over $1 million (including condos, attached and detached homes) increased 19% year-over-year to 2,296 properties sold in the GTA. Sales over $4 million increased 34 per cent to 47 properties sold. In the City of Toronto sales over $1 million and $4 million rose 13% and 52% during summer, to 897 and 35 properties respectively.

The luxury condo market experienced the most notable increases in sales during summer. Condo sales over $1 million rose 28% and 21% in the GTA and City of Toronto respectively to 199 and 170 condos sold. In the over $4 million segment, four condos sold in the GTA, all of them in the City of Toronto area. According to SIRCA's report:

Changing demographics and consumer preferences favouring urban lifestyles continue to motivate the migration of real estate consumers and investors into condominiums in the city’s central core, bolstering the market with healthy local demand.

Detached home sales over $1 million increased 20% year-over-year in the GTA and 12% in the City of Toronto to 1,916 and 580 units respectively. Home sales over $4 million experienced sales growth of 6% and 8% year-over-year in the GTA and the City of Toronto respectively, to 181 and 147 properties sold.

The first half of September was somewhat weaker than September 2017, with 387 residential sales (detached, attached & condominiums) in the over $1 million segment compared to 503 properties sold at the start of September 2017. However, Sotheby's International Realty Canada expects the market will pick up as the fall progresses.

According to Sotheby’s International Realty Canada, healthy levels of fresh inventory have been introduced into the market and buyer activity is brisk.   With Ontario’s economy projected to advance by a moderate 2.2% according to the Conference Board of Canada, consumer confidence and strong economic fundamentals are expected to anchor top-tier market health to the end of the year.

Download the whole 2018 Mid-Year Top-Tier Real Estate Report here.

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