Canada’s real estate market may finally be facing the broad downturn that industry observers have been anticipating for several years.
Rising interest rates have caused home prices and sales to taper off. In a recent interview, Benjamin Reitzes, BMO’s managing director of macro strategy, said he would be shocked if home prices don’t fall by a double-digit margin in the near future.
While some insiders are forecasting a possible market crash, luxury real estate is showing signs of continued resilience. In Toronto, for example, homes valued at $1.5 million or more have continued to sell. April 2022 saw a roughly 30 percent increase in sales of such homes over the previous year, the Financial Post reported.
This suggests that for luxury home buyers, Canada’s real estate hot spots remain desirable enough for them to ignore the rate hikes and buy a home or condo, anyway, said Sam Mizrahi, the founder of Mizrahi Developments.
“What we’re seeing is that places like Toronto and Vancouver have achieved a level of attractiveness that isn’t easily altered by changes in market conditions,” said Sam Mizrahi, the developer of The One, a supertall skyscraper that’s set to become one of Toronto’s most expensive condo buildings when it opens doors in 2023. “The real estate market will likely continue to fluctuate, but the desire to live here isn’t going anywhere.”
That opinion is supported by Andy Taylor, senior vice-president of sales for Sotheby’s International Realty Canada, who told The Globe and Mail that all of Canada’s major real estate markets have largely avoided negative impacts from interest rates and additional taxes for foreign buyers.
“There’s still interest in top properties in the city,” Taylor said. “That’s the main, overlying message. Homes that are needing work, needing a renovation, are less desirable than properties that show triple-A, which are 10-plus. And homes that are rare – we have a very short supply of larger condominiums in luxury buildings, and those are still seeing buyers.”
Ultimately, both Taylor and Mizrahi said that luxury home buyers make their decisions based on the lifestyle they want — not the price tag of getting it.
“The people buying luxury condos and homes want the absolute best — and they’re willing and able to pay for it,” Sam Mizrahi said. “Toronto and Vancouver and Montreal have become some of the most beautiful, diverse, and cultured cities in the world. That kind of status doesn’t change overnight with subtle shifts in the market.”
A recent Sotheby’s report, Top-Tier Real Estate: Spring 2022 State of Luxury, concluded that the high-end homes market has continued to grow across Canada’s major markets, including the GTA, Vancouver and Montreal.
But the trend isn’t only true for Canada’s largest markets. Reporting from the Edmonton Journal found the trend consistent with their own smaller housing market as well.
According to the Realtors Association of Edmonton, the city saw 65 properties priced over $1 million sold within the first three months of 2022 — a 38 percent increase over the previous year. That would make it the city with the second biggest year-over-year increase, trailing only Calgary.
The truth, Mizrahi said, is that Canada now offers the things so many people want from a modern lifestyle: well-designed cities with booming economies and rich culture, easy access to beautiful outdoor spaces, and a stable government that maintains cleanliness and safety of its public spaces.
Add to that list a luxury home that rivals anything in New York, London or Singapore, and you have the answer to why high-end home buyers keep coming to Canada, he said.
“I predict that this market segment will only continue to grow in coming years, even if the rest of the market continues to fluctuate,” Mizrahi said. “People will still want to live here, and developers like me will continue to build world-class homes and condos for them to live in.”