24/92019 Top-Tier Fall Market Forecast*
Emboldened consumer confidence and solid economic fundamentals in Canada’s largest housing market position the Greater Toronto Area (GTA) to lead Canadian top-tier real estate performance this fall. New data compiled by Sotheby’s International Realty Canada reveal that GTA residential real estate sales over $1 million saw bold gains over the summer months, increasing 29% year-over-year in July and August. Significant increases were experienced across every housing type as condominium, attached and single family home sales over $1 million rose 13%, 45% and 29% from 2018 levels respectively. Preliminary sales figures for the first fifteen days of September also suggest robust fall activity ahead, as overall $1 million-plus sales surged 53% year-over-year, while sales over $4 million rose 75%.
Vancouver’s top-tier real estate market is poised for gradual renewal this fall, as built-up consumer demand releases into new activity, and as housing prices continue to adjust downward to match current conditions. Activity across the city’s $1 million-plus condominium, attached and single family home markets rebounded 5%, 44% and 32% year-over-year over the summer months, culminating in an overall 25% increase in residential sales over $1 million in July and August. However, a 27% year-over-year pullback in sales over $1 million in the first fifteen days of September indicates that the road to recovery may be uneven, and that the luxury $4 million market remains soft.
Montreal’s $1 million-plus sales remained largely on par with 2018’s record highs with an incremental 1% year-over-year increase over the summer as limited inventory constrained sales; however, a 38% year-over-year surge in sales volume in the first fifteen days of September suggests healthy demand in the months ahead. While Calgary real estate sales over $1 million fell 18% from 2018 levels in July and August, initial activity in the first two weeks of September reveals the potential for continued rebalancing in the city’s buyers’ market as $1 million-sales experienced a mild 10% uptick to 23 properties.
“Toronto has made bold strides over the summer months to take its place at the forefront of Canada’s top-tier real estate market this fall, as healthy job gains and fully restored consumer confidence spur steady gains,” says Don Kottick, President and CEO of Sotheby’s International Realty Canada. “After prolonged uncertainty, Vancouver is now poised to regain traction as pent-up consumer demand gradually releases into top-tier resale activity.”
According to Kottick, the potential for Montreal to achieve new top-tier real estate records in 2019 is strong but is constrained by available inventory in premier luxury neighbourhoods, while activity in Calgary’s $1 million-plus market will remain muted given the city’s fragile economic recovery.
- Stronger than expected economic gains in the second quarter of 2019 that exceeded the Bank of Canada’s July forecast, coupled with solid job gains in August bode well for demand and confidence in Canada’s major top-tier markets this fall. Canada’s national unemployment rate lingered at 5.7% in August. During this time, employment increased by 81,000 jobs following three months of nominal change. Montreal and Toronto’s unemployment rate hovered close to the national average at 5.6% and 5.9% respectively, while Vancouver’s unemployment rate plunged to 4.4% in August, the lowest rate amongst the country’s largest metropolitan areas. Calgary’s unemployment rate was also down year-over-year to 7.3% in August, albeit through the addition of jobs in lower-wage and part-time work.
- The Bank of Canada once again maintained its target for the overnight rate at 1.75% in September, fostering an environment that will discourage mortgage rate increases this fall. Although lending rate fluctuations have a negligible effect on consumers in the ultra-luxury real estate market, steady and favourable borrowing costs will continue to support purchasers in the market for conventional and top-tier real estate under $2 million.
- Intensifying international geo-economic and geo-political tensions, which represent the “most urgent global risks at present”, according to the World Economic Forum’s Global Risks Report 2019, will amplify domestic and foreign demand for top-tier real estate in major Canadian markets this fall. Against a backdrop that includes uncertain financial markets, rising US-China tensions, insecure trade agreements in the European Union and North America, prolonged uncertainty around Brexit, tensions between the West and Russia, Iran and North Korea, as well as political turmoil in Hong Kong, Canadian real estate is an attractive asset for the hedging of portfolio risk. Moreover, Canada’s reputation for liveability, including the ranking of Calgary, Vancouver and Toronto as the fifth, sixth and seventh most liveable cities in the world according to the Economist Intelligence Unit’s 2019 Global Liveability Index, continues to draw permanent and temporary international migrants seeking security and a better quality of life. In a time of global turmoil, demand for top-tier Canadian real estate is set to intensify.
- The upcoming Canadian federal election, scheduled to take place on October 21, will cast a degree of uncertainty into top-tier real estate markets this fall as both the economy and national housing policies are set to be critical election issues. In light of concerns regarding the potential impact of the election outcome on economic performance, as well as the expansion or retraction of housing-related policies such as the mortgage stress test, some real estate consumers may delay activity until post-election.
Vancouver’s top-tier real estate market is poised to renew at a gradual but steady pace this fall. Pent-up consumer demand is trickling back into the market, as housing prices continue to adjust downward to appropriately reflect current conditions. The ongoing reconciliation of sellers’ pricing expectations and homebuyers’ readiness to act has primed the market for a boost in fall activity.
Gains made in the region’s conventional real estate market over the summer hinted at concurrent strengthening in the top-tier segment. According to the Real Estate Board of Greater Vancouver (REBGV) residential sales increased 23.5% and 15.7% year-over-year in July and August respectively, restoring Metro Vancouver activity to “historically normal” levels. During this time, real estate sales over $1 million (condominiums, attached and single family homes) increased 25% from July and August 2018 levels to 564 properties sold; a significant turnaround from the 33% year-over-year decrease in sales over $1 million experienced in the first half of 2019. The renewal of top-tier sales is largely taking place in the market for housing under $2 million; sales between $1–2 million increased 30% to 411 properties, while sales between $2–4 million increased 26% to 132 units. $4 million-plus sales declined 32% year-over-year to 21 units sold in July and August 2019.
Consumer interest and activity has rekindled in the city’s single family home market, largely due to a decline in benchmark prices, which receded 11% year-over-year in August to $1,346,500 in Vancouver East and 12% year-over-year in Vancouver West to $2,880,800. This has repositioned single family homes as viable alternatives to higher-density options for some top-tier buyers and investors. As a result, single family home sales over $1 million increased 32% year-over-year to 282 homes sold in the summer months. Over half of these sales were between $1–2 million, which were up 45% year-over-year to 157 homes sold in July and August. During this time, luxury home sales over $4 million were down 17% to 20 homes sold.
$1 million-plus attached homes sales, which had decreased 32% year-over-year in the first half of 2019, also rebounded over the summer to 112 units sold in July and August, up a significant 44% from 2018 levels.
Vancouver’s $1 million-plus condominium market, which had remained resilient in 2018 but sharply declined 51% year-over-year in the first half of 2019, also reflected signs of balancing. July and August sales of condominiums over $1 million contracted a slight 5% from 2018 levels to 170 units sold. Condominium sales over $4 million, however, decreased to a single unit sold over the summer, from five sold in the same period in 2018.
In spite of significant summer gains, preliminary data from the first fifteen days of September reflect a market recovery that will be gradual and tenuous over the fall. Overall residential sales over $1 million (condominium, attached and single family homes) were down 27% year-over-year in the first half of September to 40 properties sold. $1 million-plus condominium, attached and single family home sales experienced initial contractions of 30%, 38% and 22% to 14, five and 21 properties sold respectively, however, industry experts have noted a discernible increase in consumers’ readiness to purchase that is expected to translate into activity as the fall progresses.
With Vancouver experiencing the greatest gains in year-over-year employment growth of Canada’s three largest Census Metropolitan Areas according to the Conference Board of Canada, and given a moderate but positive provincial economic outlook for 2019, confidence in the city’s fundamentals remains high. Furthermore, there are market-wide signals that prospective home buyers and investors who have remained on the sidelines are now primed to act in advance of an inevitable, though unpredictable market rebound. As a result, the top-tier market is expected to steadily regain momentum through the fall.
In spite of a 6% uptick in overall residential sales in the City of Calgary in August 2019, as well as easing listings supply through the summer months according to the Calgary Real Estate Board, the city’s top-tier real estate market performance was muted leading into the fall. With recent sales gains largely taking place in the market for homes under $500,000, the city’s $1 million-plus market is expected to remain in buyer’s market territory into the coming months. The potential of rising inventory poses an ongoing risk to the city’s luxury market recovery.
Following a 21% year-over-year decline in residential real estate sales over $1 million (condominiums, attached and single family homes) in the first half of 2019, $1 million-plus sales fell 18% year-over-year to 100 properties sold in July and August.
Top-tier single family home sales, which comprised over 90% of $1 million-plus real estate sales, decreased 16% year-over-year to 92 homes sold in July and August. During this time, attached home sales over $1 million fell from ten to three units. After falling 65% in the first half of 2019 from 2018 levels, Calgary’s luxury condominium market experienced a nominal uptick over the summer months. Five units sold over $1 million in July and August compared to three units sold in the same months in 2018.
Initial activity in the first two weeks of September reveals fall potential. Sales of residential real estate (condominiums, attached and single family homes) over $1 million experienced a modest 10% uptick to 23 properties sold in the first fifteen days of September compared to 21 sold during the same period in 2018. Of the properties sold in 2019, 22 were single family homes and one was a condominium.
This fall, flagging consumer sentiment and the prospect of rising inventory remain the key downside risks to top-tier market outcomes in Calgary. With subdued economic projections emerging for Alberta, including the Conference Board of Canada’s most recent projection that overall real GDP will contract 0.8% in 2019, uneven top-tier market performance is expected for the city in the coming months.
Greater Toronto Area (GTA)
The Greater Toronto Area (Durham, Halton, Peel, Toronto and York) top-tier real estate market is poised for confident gains this fall, as solid consumer confidence and healthy economic fundamentals underpin performance. Modest price increases are anticipated across all housing types in the coming months, as demand continues to readily absorb housing supply in the region’s prime high-end neighbourhoods. In addition to continued gains within the City of Toronto, there has been a noticeable strengthening of demand for ultra-luxury real estate outside the city limits, as affluent buyers weigh options beyond the urban core.
Tightening conditions and sales growth across the region’s conventional real estate market permeated top-tier market performance over the summer. The Toronto Real Estate Board reported 24.3% and 13.4% year-over-year increases in overall sales in July and August respectively. Following the first half of 2019, which saw $1 million-plus residential real estate sales (condominiums, attached and single family homes) rise 12% year-over-year, summer sales over $1 million increased 29% to 2,966 properties sold in the GTA. Sales between $1–2 million increased 33% year-over-year to 2,619 units, as $2–4 million sales saw 12% gains to 308 units. Luxury sales over $4 million on the Multiple Listings Service (MLS) declined 17% year-over-year to 39 properties sold in July and August. This decline, however, continues to be attributed to the shift of luxury sales to exclusive, off-MLS channels as sellers aim to protect privacy following Competition Bureau rulings that make more transaction data publicly available.
City of Toronto top-tier sales also posted strong gains in the summer months, as $1 million-plus sales rose 25% year-over-year to 1,123 units sold. Sales between $1–2 million increased 31% to 922 properties, while $2– 4 million sales rose a modest 9% to 174 properties. Luxury $4 million sales fell 23% to 27 units as transactions moved off MLS.
Limited top-tier single family home supply continues to cap sales activity. Despite inventory constraints, July and August single family home sales over $1 million rose 29% in the GTA and 22% in the City of Toronto to 2,479 and 708 homes sold respectively. High-end GTA home sales over $4 million on MLS decreased 10% year-over-year to 38 homes sold, while $4 million-plus sales in the City of Toronto contracted 13% to 26 homes sold.
Heated demand for attached homes continued to strain an already tight market over the summer months. In spite of inventory constraints, $1 million-plus attached home sales soared 45% and 48% in the GTA and City of Toronto respectively to 262 units and 218 units sold. Over 95% of attached home sales over $1 million were in the $1–2 million range, which rose 46% year-over-year to 251 properties sold in the GTA and surged 50% to 207 sold in the City of Toronto.
Summer activity also foreshadowed solid fall performance in the city’s top-tier condominium market. In the first half of 2019, condominium sales over $1 million increased 10% year-over-year in the GTA, and in July and August, sales increased 13% and 16% to 225 units sold in the GTA and 197 sold in the City of Toronto respectively. Over 90% of $1 million-plus condominium sales were between $1–2 million, which saw sales increase 19% year-over-year to 207 sold in the GTA, and 19% to 179 sold in the City of Toronto. One luxury condominium over $4 million sold in the GTA during this time within the City of Toronto, down from four units sold in July and August 2018.
Preliminary sales figures for the first fifteen days of September reflect a vigorous start to a healthy fall market. Overall real estate sales (condominiums, attached and single family homes) over $1 million increased 53% to 577 properties sold in the GTA, while sales over $4 million were up 75% to seven properties sold. $1 million-plus GTA condominium, attached and single family home sales surged 56%, 64% and 51% year-over-year to 50, 59 and 468 units sold respectively.
Within the City of Toronto, overall real estate sales over $1 million were up 42% year-over-year to 242 properties sold, while three properties sold over $4 million in the first fifteen days of September, on par with activity during the same period in 2018. $1 million-plus condominium sales experienced a dramatic 74% year-over-year spike to 47 units sold in the first fifteen days of September, while attached home sales rose 56% to 50 properties sold. During this time, single family home sales over $1 million rose 31% year-over-year to 145 homes sold.
While Ontario’s economic growth is projected by the Conference Board of Canada to be modest in 2019, employment gains in Toronto continue to be healthy at 3.6%, and real estate market confidence remains buoyant. As a result, top-tier market performance is expected to be solid to the end of the year.
Following historic gains in $1 million-plus real estate sales in 2017 through 2018, and a modest 5% year-over-year increase in sales over $1 million in the first half of 2019, the City of Montreal’s top-tier real estate market is set to maintain healthy activity into the fall. While consumer demand remains robust, diminishing top-tier housing supply continues to constrict potential activity. As a result, overall residential real estate sales over $1 million (condominiums, attached and single family homes) in July and August sales remained largely on par with 2018 levels with a 1% uptick to 138 properties sold compared to 137 units sold in the summer of 2018.
The scarcity of top-tier inventory is most acutely felt in Montreal’s luxury single family home market. Single family home sales over $1 million fell a nominal 3% from 73 homes sold in July and August 2018, to 71 homes sold this past summer, due largely to a shortfall of listings despite healthy consumer demand
Steady absorption of resale inventory from luxury condominium developments completed in recent years sustained Montreal’s luxury condominium market over the summer months, foreshadowing solid fall performance. Condo sales over $1 million remained largely on par with last year’s record highs, contracting 4% year-over-year to 26 units sold in July and August, compared to 27 units sold over the same period in 2018.
The attached home market saw an 11% year-over-year increase in summer sales with 41 units sold in July and August this year compared to 37 units sold in the same period in 2018.
Preliminary sales in the first half of September reflects continued progress this fall. Residential real estate sales (condominiums, attached and single family homes) over $1 million were up 38% year-over-year to 36 properties sold in the first fifteen days of September. Top-tier condo sales reflected uniquely strong potential, with 12 units sold in the first fifteen days of the month compared to a single unit sold during the same period a year ago.
Montreal remains well-positioned to set new records in 2019. According to data released by the Quebec Professional Association of Real Estate Brokers (QPAREB), the Montreal CMA achieved new sales records for the months of July and August, as the summer also ushered in the area’s 53rd consecutive monthly increase in residential sales overall. However, tightening supply in the $1 million-dollar plus real estate market may hamper activity while promoting price gains in the city’s luxury segment in the months ahead.
Download the 2019 Top-Tier Mid-Year Report (released July 2019)
The information contained in this report references market data from MLS boards across Canada. Sotheby’s International Realty Canada cautions that MLS market data can be useful in establishing trends over time but does not indicate actual prices in widely divergent neighborhoods or account for price differentials within local markets. This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information and analysis presented in this report, no responsibility or liability whatsoever can be accepted by Sotheby’s International Realty Canada or Sotheby’s International Realty Affiliates for any loss or damage resultant from any use of, reliance on, or reference to the contents of this document.