Engel & Völkers recently released its 2024 Mid-Year Luxury Real Estate Market Report, highlighting that luxury properties in Halifax, Ottawa, Toronto and Vancouver are outperforming market trends in the $1 million-plus market segment.
The report addresses misconceptions about “Canada’s foreign buyer ban,” which the company says has affected the country’s image and disrupted condominium market dynamics, especially in new construction. It also reveals that the market is experiencing a decline in domestic investor activity, with sluggish condominium sales as buyers await relief from higher interest rates.
“Canada’s luxury real estate markets are demonstrating impressive resilience despite the slowdown in overall sales. While interest rates impact the conventional market, particularly first-time buyers, luxury buyers often pay in cash and are therefore less affected,” says Anthony Hitt, president and CEO of Engel & Völkers Americas.
“We anticipate that Canada’s luxury markets will remain stable as real estate continues to be an appealing and safe investment.”
Key national trends
Luxury home sales go against the grain
Sales of detached luxury homes are growing strong in major Canadian cities, defying overall market trends. Rising interest rates have a limited impact on the luxury market, as many buyers pay in cash.
For example, from January to June, Toronto saw a 4.73 per cent increase in prices for homes over $8 million compared to last year. In the first half of this year, Halifax reported a five per cent increase in sales for homes over $1 million. In the same period, Ottawa’s home prices grew by eight per cent for properties between $1 million and $1.99 million, and Vancouver saw a 4.7 per cent increase in the average sale price for homes between $2 million and $3.99 million despite more listings and fewer sales.
Decline in domestic investors
Homes are now mainly being bought and sold for standard reasons like relocating, upsizing and downsizing.
Most domestic investors have left the market due to decreased incentives and higher interest rates. The report notes that in fall 2023, the Bank of Canada indicated 30 per cent of residential home purchases in early 2023 were made by investors, down from under 20 per cent in 2014.
Sluggish condominium sales
Condominiums, which are normally entry-level homes for first-time buyers, are experiencing slow sales as buyers wait for interest rate relief. This lack of competition means buyers who would usually purchase condominiums are now competing for houses. Engel & Völkers predicts that intense competition for residential properties will eventually push buyers back to condominiums.
Millennials, now focused on building families and careers, find one-plus bedroom units insufficient. Likewise, Baby Boomers, who would normally downsize to condominiums, prefer to stay where they are due to the high prices and inadequate size of current condominium inventory.
Review the full report, including regional highlights and property spotlights, here.
