Sotheby's International Realty Canada just published their forecast for the 2017 Fall Market. Montreal is the rising star, becoming the luxury real estate hot spot with increases in sales, and prices in the $1M+ segment. Strong economy is helping to establish a healthy activity in the high-end GTA market, despite the slowdown following the introduction of the Ontario Fair Housing Plan in April 2017. Vancouver's $1M+ segment is expected to regain momentum, thanks to strong local demand in the condo sector. The top-tier sales in Calgary during the summer months reflected its return to stability as Alberta emerged from recession.
What was going on in the country's four largest metropolitan markets this past summer?
City of Toronto sales in the $1M+ and $4M+ segment decreased 27 per cent and 28 per cent year-over-year respectively. GTA July and August sales in the $1M+ dropped by 40 per cent year-over-year and by 20 per cent in the $4M+ category. Calgary sales over $1 million recorded a 1 per cent gain compared to last summer, indicating stability for the coming months. Vancouver's luxury real estate sales in the 4M+ category dropped by 21 per cent year-over year in July and August, while $1M+ sales increased by 5 per cent compared to summer of 2016.
Brad Henderson, President and CEO of Sotheby's International Realty Canada is optimistic:
The country’s exceptional economic performance is expected to elevate top-tier real estate market confidence and performance this fall. Montreal, in particular, is emerging as an unexpected bright light on Canada’s luxury real estate horizon, but the reality is that improvement in economic productivity, wages and job gains will be positive for all of our metropolitan markets in the coming months.
Key National Influencers
- Strong Canadian economy. The economy is at its fastest annualized rate in 6 years between March and June. The IMF projected that Canada will lead G7 countries in economic gains in 2017, and it upgraded its forecast for annual economic growth to 2.5%, while The Bank of Canada increased its projection for 2017 Canadian economic growth to 2.8%.
- Falling national unemployment rates and job gains in the country's major real estate markets. Canada's unemployment rate dropped to 6.2% in August 2017, its lowest level since the beginning of the Great Recession in October 2008. Toronto's rate remained slightly above the national average, but the province of Ontario leads national employment rates with 31,100 net new positions.
- Two consecutive key interest rate hikes by the Bank of Canada - in July and September, positioned the key interest rate at 1.00% leading down. The increase in mortgage rates should not have any or just minimal impact on the top-tier real estate activity, so long as they're announced on time and in line with the economy.
- Foreign demand for Canada's top-tier real estate remains high, despite the strengthening CAD, which was around 80 cents to the USD in September 2017. Toronto, Vancouver, Calgary and Montreal are still popular among foreign students and people are looking to settle down in Canada.
Greater Toronto Area (GTA):
Following the introduction of the Ontario Fair Housing Plan in April 2017, some uncertainty could be felt in the hot GTA's top-tier market. However, sales in the $1M+ category increased by 41 per cent in the GTA and 25 per cent in the city of Toronto year-over-year for the first six months of the year.
Sales activity recorded during summer 2017 shows a return to a healthier market, with the detached home segment expected to moderate by the end of 2017. Sales volume in the $1M+ category (condos, detached and semi-detached homes) dropped by 39 per cent year-over-year, amounting to 1,926 properties sold in the GTA in July and August. Luxury sales over $4M contracted 29 per cent to 35 units sold. As for the city of Toronto, sales over $1M fell by 27 per cent to 793 properties and the $4M segment experienced a 28 per cent drop, amounting to 23 properties.
The detached home market in the top-tier category experienced the most significant adjustment during the summer months. Sales over $1M dropped by 44 per cent in the GTA and 37 per cent in the city of Toronto, falling to 1,600 and 517 units sold. Sales in the $4M category experienced a 34 per cent decrease in the GTA, and 33 per cent in the City of Toronto, amounting to 31 and 20 units sold.
The summer market in the condo segment was something different. The sales in the $1M category increased by 8 per cent year-over-year in the GTA and 15% in the City of Toronto to 155 and 140 units respectively. There were four $4M+ sales recorded, up from two units from the same period in 2016. Three of those were in the City of Toronto.
There was a drop in sales in August compared to July in the $1M+ segment. While July sales were up by 33 per cent and 43 per cent year-over-year in the GTA and Toronto respectively, in August sales dropped by 11 per cent and 6 per cent. According to SIRC's report,
Recent measures to expand rent control to all private rental units in Ontario are expected to prompt condominium investors to reconsider purchases and may result in an increase in fall listings.
The overall forecast for the Fall market in the GTA and City of Toronto is positive:
New inventory is expected to be introduced into the market as vendors aim to exit at current highs, offsetting an enduring shortage of supply. Buyer activity is projected to moderate to healthier norms. Although several months will be required for consumer sentiment and the top-tier market to stabilize following the initial “shock” of policy introductions, strong economic fundamentals are expected to anchor top-tier market health in the long term.
Read the full report here.