Some might consider it a perverse pairing of housing news items: while the #Unignorable tower representing the high levels of Toronto homelessness trended this week, so too did the demand for luxury condos. As family and child poverty rates continue to rise in this city so too does the luxury sales segment.
Here, luxury is defined as properties exceeding the $5 million mark.
Re/Max Canada reported that the year-to-date sales of luxury freehold and condo properties topped 100 units between January and Halloween, up 8.5 per cent from the year prior. In Toronto proper, the increase was 26 per cent, with the bulk of purchases made in Rosedale and Forest Hill.
The average luxury property has decreased from its $6,726,532 average sales price in 2018 to $6,517, 143 in today’s market.
“The one consistency in luxury Toronto real estate throughout 2019 has been value – and it’s evident from the bottom end of the market to the top,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada.
“Homebuyers at virtually all price points – including uber-luxe – are kicking the tires once again. As a result, momentum is building in the overall market, which is reflected in the escalation in sales at both the $2 million and $5 million price points.”
This past July, CTV News attributed the increase in the luxury segment to international buyers, including new Canadians, permanent residents, and investors. Toronto has become the preferred Canadian destination for many Chinese investors. However, a gap in the market exists: the “less than luxury” segment between $3 million and $4.99 million has actually been lagging, down 4.7 per cent from last year.
“Sales of luxury properties between $3 and $5 million are expected to climb in the year ahead as the ripple effect works its way through various price points,” explains Alexander. “Sales at lower price points tend to stimulate sales at the next level, as homebuyers trade-up to larger homes or more desirable neighbourhoods. Our research has found that the spread is narrowing with each month’s sales figures.”
York Region has also shown a 22 per cent spike in luxury property sales as baby boomers have begun the process of downsizing. With baby boomers making their luxury homes available, it’s the same cohort that are increasing the demand for luxury condo units downtown – and elsewhere.
“The fog has lifted – buoyed by solid economic factors, but also by the belief that the worst is behind us,” says Alexander. “The housing market has shifted into recovery mode. Luxury home sales are climbing, prices are stabilizing, and demand is on the upswing for upscale product.”
And the market is predicted to rise continuously as the Economist Intelligence Unit’s 2019 Wealth Opportunity Index reports that the number of people with at least $1 million in investable assets will double within the next decade.
“While home sales in the luxury segment are off peak levels reported in 2017, great strides have been made over the last six months,” says Alexander. “We are heading in the right direction. The momentum is expected to continue, with increased demand for high-end product in 2020 propping up values as well. The insatiable appetite for luxury homes has subsided, but healthy demand still exists in the GTA.”