Yahoo Finance Posthaste: Canada's luxury housing market falls 'back to reality' from heady heights
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The buying and selling frenzy that drove Canada’s luxury real estate market to new heights during the pandemic continued to cool over the summer.
Sales and listings of homes priced above $1 million fell across the country in the third quarter of 2022, as both buyers and sellers sat on the sidelines amid a weakening economy, bringing the market “back to reality,” according to Sotheby’s International Realty Canada’s latest luxury real estate report, released this morning.
Climbing interest rates, high inflation, turbulent financial markets and geopolitical pressures, such as Russia’s war on Ukraine, were just some of the factors that led buyers and sellers to sit out the season.
Additionally, a surge in summer travel drove more sellers to retreat from the market, keeping inventory levels even lower than usual in what is typically a slower time of the year for real estate activity.
“Canada’s conventional and luxury real estate markets are undergoing a long-awaited transition after an era of over exuberance during the pandemic, particularly in those regions that saw the most acceleration over the past two years,” Don Kottick, chief executive of Sotheby’s, said in a news release.
“Real estate buyers and sellers are taking a step back to strategize.”
In the Greater Toronto Area, Canada’s largest residential real estate market, sales of condominiums, semi-detached and detached homes priced above $4 million fell 42 per cent compared to the same time last year, when the market was still posting gains. Sales of homes priced above $1 million also fell, declining 39 per cent year over year. In September, they were down 52 per cent on an annual basis.
Vancouver’s market also came off the boil in the third quarter. Inventory “evaporated” and sales of homes above $4 million fell 51 per cent from the record set last summer. Sales of residences priced over $1 million declined 37 per cent. In September alone, transactions of homes on the market for $1 million or more fell 70 per cent year over year, Sotheby’s said.
In Montreal, the luxury market balanced out after sales climbed a record 71 per cent in the first half of the year. Sales of homes above $1 million fell 26 per cent from the same time last year, while transactions of homes above $4 million remained relatively flat.
Luxury real estate showed signs of resilience in Calgary, however. Sales of homes above $1 million were “stable,” Sotheby’s said, falling only 12 per cent from the same time last year. Market activity also proved resilient at the start of autumn, with September sales of $1-million-plus homes roughly in line with last year’s levels. The market’s strength is largely correlated with a healthy Alberta economy set for continued growth amid high oil and gas prices, even as other parts of the country are expected to fall into recession. The province is also attracting people from across Canada amid a campaign to lure more professionals to settle inside its borders.
Meanwhile, low inventory of homes for sale in major markets such as Toronto and Vancouver, signal danger ahead, Sotheby’s said. While sellers have taken a back seat in those markets, there are a large number of people still eager to buy. That’s creating pent-up demand that will ultimately keep home prices high and affordability an issue in luxury markets.
Kottick said there is little governments can do policy-wise to address the supply crisis, which beyond stretching affordability, could even worsen Canadian employers’ recent struggle to hire workers.
“Demand-side policies and taxes, including bans and taxes on foreign buyers, will offer little benefit, while creating unintended consequences when Canada is striving to attract and retain people with desperately needed skills and talent,” he said.
Still, prices are coming down from the heights reached when the market was its most exuberant, Kottick said. Buyers no longer appear willing to overpay for a home, which means sellers will have to adjust their expectations, or else see their properties passed over.
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ROBOTS WITH BROOMS Faizan Sheikh, Pablo Molina and Avidbots Corp., the “autonomous” floor cleaning robot company they co-founded in 2014 are looking to sweep the planet, or at least that portion of it — airports, warehouses and big-box stores — with acres of floorspace in need of a good scrub. They’ve sold 1,000 robots so far, and chances are there’s one working the nightshift somewhere near you. But their success doesn’t mean machines are replacing human workers. Rather, the robots are helping to fill a gap in staffing in an industry with constant employee turnover. The Financial Post’s Joe O’Connor has the full story. Photo by Handout/Avidbots Corp.
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Canada’s annual rate of housing starts jumped 11 per cent to 299,589 units in September from 267,443 in August, reaching its highest monthly level since November 2021.
Data from the Canada Mortgage and Housing Corporation released on Tuesday showed the rate of urban starts increased 12 per cent to 276,142 in the month while multi-unit urban starts surged 16 per cent to 216,549 units. The pace of urban starts of single-detached homes remained flat at 59,593 units.
Montreal, Toronto and Vancouver recorded large increases in multi-unit starts on a seasonally adjusted annual rate (SAAR) basis, which resulted in an overall increase in Canada, Bob Dugan, CMHC’s chief economist said in the report.
— Shantaé Campbell, Financial Post
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Today’s Posthaste was written by Victoria Wells (@vwells80), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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