Recession unlikely to dampen demand for $1 million-plus home, realtor predicts
So-called “top-tier real estate” — most notably Toronto and Vancouver homes in the $4 million-plus stratosphere — remain in high demand, with sales expected to spike further by the end of this year.
All the talk of a looming recession doesn’t appear to be having a dampening effect, at least not yet, except in Calgary where sales of million-dollar-plus homes have plummeted by 36 per cent in the first half of this year, says an annual report by Sotheby’s International Realty Canada.
Across the GTA, sales of houses and condos over $1 million were up 56 per cent in the first half of this year over the same period last year, surpassing Canada’s priciest city, Vancouver, yet again, where houses and condo sales in that price point were up 48 per cent, says the report being released Thursday.
A lot of that surge is because so many “conventional” detached and even semi-detached homes and condos now have been catapulted into the $1 million-plus price range in the country’s two biggest cities through a combination of low interest rates, demand that continues to outstrip supply, a low dollar that is encouraging more foreign investment and strong immigration, the report notes.
But also contributing is an “escalating sense of urgency” among house hunters in Toronto and Vancouver that if they don’t pay whatever it takes to get into the low-rise house market now, they’ll be locked out forever.
“We don’t see a correction coming in the single family home market,” says Ross McCredie, CEO and president of Sotheby’s International Realty Canada.
“There is tonnes of demand out there and a lot of people buying at these (top tier) price points are baby boomers who don’t care if the market or interest rates go up or down because a lot of them are buying in cash. They’re saying, ‘I’ve got 20 good years left and I want to live them well.’”
In fact, the biggest percentage increase in sales in the higher-end GTA market — up some 72 per cent — were properties over $4 million in the first half of 2015 over the same period a year ago, notes Sotheby’s.
Even Toronto’s luxury condo sector saw sizable gains, with $1 million-plus condo sales up 48 per cent to the end of June over the first half of 2014.
Demand for houses and condos is likely to be fuelled further if the Bank of Canada moves to lower interest rates again next week as widely expected, added McCredie in a telephone interview from Vancouver.
Multiple bids are increasingly common even on higher end homes, the report notes: Across the GTA, 47 per cent of $1 to $2 million homes sold over list price in the first half of 2015, up from 30 per cent in the same period of 2014, says Sotheby’s.
Some 35 per cent of $2 to $4 million homes and 18 per cent of $4 million-plus homes sold over list price, a doubling from the 18 and 9 per cent that sold over list price during the first half of 2014.
That increase is being driven, in part, by realtors who are under pricing properties specifically to fuel bidding wars.
Of course, $1 million isn’t what it used to be, the report acknowledges. In many parts of Toronto and Vancouver, where bidding wars and bully bids have become the common weapons of real estate wars, true “luxury” now comes at a heftier price tag.
It’s about $2 million and up for a 1,500 square foot detached house in Toronto and $1.5 million for a 1,400 square-foot condo.
In Vancouver, you’re looking at over $3.5 million for a house, albeit a more spacious 4,000 square feet, and the same as Toronto, about $1.5 million, for a 1,400 square foot condo, says the report.
Source: The Star, 07/09/2015