Sales volume in the Canadian luxury market is holding, despite a national drop in the conventional market
Engel & Völkers: For Vancouver and Halifax, Real Estate sales volume was up for luxury condos priced $1 – 3.99 million
Engel & Völkers released its 2022 Year-End Luxury Real Estate Market Report today, featuring key findings based on data for homes priced over $1 million in Canada’s most in-demand metropolitan real estate markets — Halifax, Montréal, Ottawa, Toronto and Vancouver. According to the report, the market normalization trend established in the first half of the year continued across the country. Despite this, luxury markets in Canada are holding their value, but prices are adjusting downwards from their inflated values in some parts of the market.
At the start of 2022’s second quarter, the Bank of Canada increased interest rates. This triggered market normalization, helping to bring balanced conditions to Canada’s real estate markets. Decreased sales volume and replenished inventory are causing price growth to plateau or decline in some areas of the market. Price declines are most common in the conventional market, especially in periphery markets which saw exponential growth during COVID. However, well-located, quality inventory continues to increase in value year-over-year, though the growth rate has slowed.
While the real estate market goes through an adjustment period, many prospective homebuyers are opting to ‘wait and see’ before purchasing a home. As a result, the rental market has returned to pre-pandemic prices in Canada’s major cities.
Last year represented a period of adjustment as the Bank of Canada brought interest rates back up after historic lows during the pandemic. Moving into 2023, market fluctuations will be less dramatic as buyers and sellers acclimatize to stable market conditions. When stability returns, would-be buyers and sellers will feel comfortable making transactions in the market again. Engel & Völkers forecasts the return of a bustling real estate market once buyers and sellers adjust to new market conditions. It expects this to occur between the second and third quarters of 2023. If low supply is not addressed, this could lead to steady price increases due to demand outpacing supply.
“Canada’s real estate market is returning to a steadier pace after an unprecedented growth period. While some buyers continue to monitor the market and the Bank of Canada’s interest rates, this provides an immediate opportunity for eager buyers to negotiate deal terms and prices on properties, unlike recent years,” says Anthony Hitt, president and CEO, Engel & Völkers Americas. “We find interest rate increases are not as disruptive to the ultra-premium markets, as these buyers tend to purchase homes with much of the equity paid upfront. We expect luxury markets to remain stable in Canada, as real estate remains an attractive investment.”
Halifax’s luxury real estate market grew in 2022. In 2021, homes priced over $1 million accounted for 2.6 per cent of all units sold. In 2022, this number grew to 4.5 per cent. Condo units sold priced between $1 – 3.99 million also grew, from 13 in 2021 to 20 in 2022.
Montréal’s market saw prices for all property types combined hold in the $1 – 3.99 million range despite the sales volume dipping by 55 per cent in the second half of the year.
Ottawa’s $1 million-plus market was the only segment to see year-over-year growth in sales volume. This segment accounted for 12 per cent of all units sold in 2021, up from nine per cent from the year prior.
Toronto’s 2022 sales volume of condos priced between $1 – 3.99 million is up 71 per cent from 2020, but down by 18 per cent from 2021.
Vancouver saw accelerating demand for condos, particularly for units priced between $1 – 3.99 million. In this segment, units sold increased by 95 per cent year-over-year, with 62 per cent of all sales occurring in the first half of the year.