Even though the luxury homes segment is more shielded from rising mortgage rates, inflation and other factors that put pressure on the overall real estate market, prospective luxury real estate sellers and buyers made a strategic withdrawal from the market from the middle to the end of 2022, says the latest luxury real estate report from Sotheby’s International Realty Canada..“After an era of intense hyperinflation, new post-pandemic benchmarks for Canadian conventional and luxury real estate were established in 2022 as the market processed the impact of aggressive interest rate hikes and the effects of an increasingly uncertain global and domestic economic climate,” says Don Kottick, president and CEO of Sotheby’s International Realty Canada. “By the end of the year, luxury housing segments in several major metropolitan areas were on the brink of buyers’ market conditions, while others had very clearly shifted into this territory.” .Going forward, the segment will move toward a buyers’ market, as opposed to the sellers’ market of the last two years, says Kottick..“The market is now on the verge of another important adjustment, this time in terms of pricing. It has taken several months for home sellers to realize the impact of the changing market on the market values of their properties,” he says. “As new property listings come onto the market in 2023, their pricing will shift to meet current realities.”.“This will start to unlock long-awaited opportunities for buyers and upsizers to purchase homes that meet their lifestyle needs as they acclimatize to the market.”.So, for the time being, the luxury market will be driven by the same dynamics driving overall real estate..“A fundamental deficit of housing across every property type and price category will continue to challenge major metropolitan housing markets, and in particular, Vancouver and Toronto,” says Kottick. “Although housing prices are expected to adjust downward to realistic market norms in several major metropolitan areas, pent-up demand for housing mobility as well as anticipated population gains from immigration will continue to support housing values in the long term.”.The Foreign Buyers Ban, prohibiting the purchase of residential property by non-Canadians that came into force Jan. 1, 2023, as well as demand-side policies and taxes will have a negligible effect on affordability, according to Kottick, and have largely served to confuse and frustrate prospective new Canadians at a time when the country is aiming to attract skills, talent and capital..Sotheby’s detailed activity in Canada’s four largest markets, with three of the four showing cooling high end sales..The exception is Calgary, which had sales of homes priced at $1 million-plus reach 1,274 in 2022, up from 1,101 in 2021..From the Sotheby’s report, here is how each of the four performed..Calgary.Calgary’s luxury real estate market out-performed Canada’s largest major metropolitan areas, as the city’s strengthening economic fundamentals ignited consumer confidence and civic optimism and as inter provincial-migration lifted demand for the city’s conventional and top-tier housing. .As a result, the city’s top-tier market rebounded in 2022, and sales over $1 million rose 16% year-over-year from 2021 levels. Sales over $4 million increased 50% to six properties sold. $1 million-plus single-family and attached homes sales saw 12% and 68% annual sales gains, respectively, while condominium sales over $1 million experienced a significant 79% increase year-over-year.. Vancouver.Vancouver experienced a sharp decline in sales following the first quarter of the year as prospective buyers, frustrated by an era of heated market conditions, paused in anticipation of more favourable opportunities ahead. .Overall, residential sales over $4 million and $10 million closed at volumes 30% and 46% below 2021 levels. Luxury condominium sales over $4 million remained stable with a nominal 3% year-over-year uptick, while attached home sales declined 73%. .The city’s $4 million-plus single-family home sales decreased 32% year-over-year, while ultra-luxury single-family home sales over $10 million fell 46%. Overall, residential real estate sales over $1 million were down 29% in 2022 from the city’s record sales volume in 2021..Toronto.Luxury sales in the Greater Toronto Area receded through the course of 2022, as listings supply faded, and buyers temporarily retreated. Residential real estate sales of over $4 million (condominiums, attached and single-family homes) fell 24% year-over-year, while ultra-luxury sales over $10 million on MLS declined 29% from 2021 levels. Sales of condominiums, attached and single-family homes over $4 million fell 29%, 25% and 23% year-over-year, respectively. Overall, $1 million-plus residential sales saw an annual decline of 28%, despite underlying demand for top-tier housing and housing mobility. .Montréal.The luxury real estate market tempered to more balanced conditions over the course of 2022. The city closed the year with $4 million-plus residential real estate sales nearly on par with 2021 levels, with a modest 2% year-over-year uptick, while sales activity over $1 million experienced an 18% annual decline. Overall, $1 million-plus single-family home sales were down 22% year-over-year, while attached home and condominium sales over $1 million fell 23% and 5%, respectively.
