Published On: Tue, Mar 13th, 2018

Luxury properties swept up in Toronto’s housing slump

The Toronto region’s soft housing market has caught up with luxury buyers in the first part of the year, with sales of $ 3 million-plus properties down as much as 60 per cent from the fevered activity of early 2017, according to a Re/MAX report released on Tuesday.

Only 76 luxury homes, including condos, sold in the Toronto area in January and February this year, compared to 180 in the same period last year and 79 in 2016 — a better comparator than last year’s hyperactive property market, says the company.

Among this year’s 68 sales of luxury houses, 45 were in the City of Toronto. Two toney neighbourhoods, Rosedale and the Kingsway, actually saw increases over last year, with 14 sales between them so far.

The biggest decline was in York Region, where there were only eight sales, compared to 41 last year.

While resale housing prices were down 12.4 per cent overall in February, luxury homes were actually selling for more this year. The average transaction in the $ 3 million-plus category was about $ 4.2 million, compared to $ 4.1 million last year.

That’s encouraging, said Re/MAX vice-president and regional director Christopher Alexander. Brokers and agents are reporting more activity in the last two weeks, as anxiety over new mortgage stress test rules begins to subside, he said.

“Demand is starting to rear its head again,” said Alexander, who acknowledged that industry insiders have an interest in painting an optimistic market scene. But, he said, his view is buoyed by demand for Toronto-area real estate and the Canadian economy.

Outside of a major economic event leading to a drastic drop in employment or a massive interest rate rise, there is nothing to stop the Toronto-area market from growing again, he said.

“The economy’s growing, (housing) inventory is low, demand is high, our GDP is high, Toronto is one of the most affordable global world cities. For condos, our price per square foot is $ 791, which is expensive. But if you compare it to Vancouver, which is at $ 1,200 a foot, and you go to Hong Kong, which is $ 3,200 a foot, New York, $ 1,600 a foot — we’re half the price of New York — I don’t see what’s going to stop us when you have such strong market fundamentals,” said Alexander.

Luxury condos and townhouses continue to be hot sellers in high-end real estate feeding the downsizing market. Eight condos sold for $ 3 million or more in the first two months of this year, up from five last year, with limited supply helping push up prices, said Re/MAX.

Demand for luxury condos is also evident in the rental market, where properties leasing for $ 4,000 to $ 6,000 a month are being snapped up within 30 days.

Outside Toronto, the Oakville luxury market has also softened, but houses in the $ 3 million-and-up range were actually selling faster than in the past. And the 15 houses that sold in Oakville in the first two months of this year were more than double the number sold in the same period in 2016.

“Oakville is still much more affordable than a lot of Toronto property, and you can still access the city pretty reasonably,” said Alexander.

As of the report’s publication, there were 44 homes listed for more than $ 3 million in Oakville, 18 of them priced over $ 5 million.

Luxury in the Hamilton-Burlington area — considered separate from the Toronto region by Re/MAX — starts at about $ 1 million. Sales of homes $ 1 million and up are also softer there this year, with 59 selling in at that price point in the first two months of 2018, compared to 133 last year.

Re/MAX expects that the high price of Toronto real estate will continue to drive buyers west. It notes that prices in Burlington can be 20 to 30 per cent lower than those in Oakville, and less still than in the City of Toronto.

The report also notes that Burlington is drawing buyers who want to demolish and rebuild on the lots occupied by backsplits, sidesplits and bungalows that often list in Burlington for between $ 700,000 and $ 900,000.

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Luxury properties swept up in Toronto’s housing slump