Shaky stock markets, Brexit turmoil and trade disputes that rattled consumer confidence in Canada’s high-end real estate market last year will continue into 2019.
But the strong employment and above-average population growth in Toronto mean the region is poised to weather global forces better than most cities, says Brad Henderson CEO of Sotheby’s International Realty Canada.
The company’s 2018 year-end report, released Thursday, points to looming financial volatility that could stall the luxury real estate market in 2019.
But Toronto-area housing remains “the most blue chip of Canadian real estate at this point in time,” said Henderson, who acknowledged that the $1 million-and-up price point spells luxury in other cities but is about the average cost of a detached house in the Toronto region.
“If (U.S. President Donald) Trump is impeached, if China puts trade embargoes on other countries it will have an effect, but nothing near the effect people losing their jobs would,” he said.
As positives, Sotheby’s cites the region’s 2.3 per cent economic expansion last year, its low 6.2 per cent unemployment rate and 2.5 per cent population growth over 2017.
The company reports that sales of Toronto-area homes priced at $1-million or more dropped 31 per cent last year compared to 2017, and the small but lucrative $4-million-plus category saw a 40 per cent year-over-year plunge. But the year-over-year comparisons are distorted by the record high sales of the first quarter of 2017.
Like the overall market, sales in the $1-million-plus range climbed as the year went on.
“In the second half of the year, transactions were actually up 5 per cent when compared to 2017 for properties over $1 million and were down only 10 per cent for properties over $4 million,” said Henderson.
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Although high-end townhouse sales were flat last year, condos performed relatively well, falling only 3 per cent year over year in 2018. Units priced between $2 million and $4 million saw a 12 per cent gain in the number of sales. But there were only 21 sales over $4 million, a 19 per cent drop compared to the previous year.
Demand for condos will continue to grow along with the supply, he predicted. They are relatively affordable compared to detached housing, they appeal to “right-sizing” consumers and they remain attractive to investors, who want to rent their units in the city’s tight 1 per cent vacancy rate where competitive bidding is increasingly common among would-be tenants.
Last year’s numbers are in comparison to 2017 when the province introduced its Fair Housing Plan, including a foreign buyer tax in April, causing the region’s housing market to almost immediately slump. That policy, along with interest rate rises and new mortgage stress tests saw the number of resale home transactions drop 16 per cent in 2018 compared to 2017, according to the Toronto Real Estate Board (TREB).
Prices generally weathered last year’s real estate slump, particularly in the City of Toronto, he said.
“Depending on the property and the neighbourhood, they have gone from low single-digit losses to low single-digit gains.” said Henderson.
In the last half of the year, 21 per cent of $1 million-plus homes in the Toronto region sold for above list price. Inside the city boundaries, 35 per cent sold for over asking.
Luxury housing markets in Calgary and Vancouver retreated last year due to policy interventions and the struggling Alberta oilpatch, says Sotheby’s. But Montreal saw a 20 per cent year-over-year increase in property sales over $1 million.
Sotheby’s is best known as a luxury-end realtor but sells properties at all price points.
Tess Kalinowski is a Toronto-based reporter covering real estate. Follow her on Twitter: @tesskalinowski
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