Canada’s premium home market, that being homes that are valued over $1 million CAD, rose significantly in four key real estate markets in 2014, and should keep making big improvements in 2015, according to a report by Sotheby’s International Realty released last week.
Sales growth was healthiest in the Toronto market, where premium home sales improved by 38 percent year-over-year, while expensive homes in the Vancouver market saw a sales growth of 25 percent from the previous year. Likewise, luxury homes in Montreal and Calgary sold 21 percent and 16 percent better in 2014 as compared to 2013, according to the Sotheby’s analytic report.
The firm believes that increased consumer froth and limited supply reduced the number of days these high-end homes were on the market, and subsequently increased the share of homes in these markets, particularly Toronto and Vancouver, that were selling at more than the asking price.
This phenomenon should continue into the new calendar year, as demand may continue trumping supply in both Toronto and Vancouver. Premium housing markets in Calgary and Montreal, on the other hand, may be more balanced, with greater supply-demand equilibrium as compared to the former two market. Further, oil price reductions were cited as another variable that may affect the sales of premium homes in the Calgary market.
“We’re really watching Calgary very closely,” warned Sotheby’s President and Chief Executive Ross McCredie. “There’s fear out there in terms of what 2015 is going to look like if oil stays where it is today.” He did suggest that consumers may “sit the fence” and let things play out with regards to oil prices and the gyrations thereof, but also noted that there is not much of a chance Calgary’s housing market will flat in 2015. McCredie also suggested that late 2014 “saw a lot of people waiting,” which resulted in many transactions falling through. “I think they’re all just taking a cautious look at it,” he postulated.
Oil prices were, in fact, cited by McCredie as the one variable that could predicate the success or failure of Calgary’s housing market in 2015, including the luxury segment. “Six months later, if oil’s still at $50 or less, I think you’re going to start to see some really concerned people there,” he quipped.
Although, statistics from Canada Mortgage and Housing Corp. recently showed that foreign ultra-premium homeownership figures in Vancouver and Toronto were not that high, McCredie said that these investors actually have taken about half of all the homes worth $5 million or more in the Vancouver and Toronto markets. This is in stark contrast to CMHC’s stats, which showed in December that only 2.4 percent and 2.3 percent respectively of Toronto and Vancouver condominiums were owned by foreigners.
“It’s not an exact science,” explained McCredie. “It’s not like you can literally say, ‘Well there’s X number,’ because what we see a lot is the transaction for foreigners buying Canadian real estate happens through Canadian subcompanies.” Many of the sales McCredie referred to would really not be included in CMHC’s report, as most of these sales are processed through foreign-owned Canadian companies.