Sotheby’s International Realty Canada just released its Top-Tier Real Estate Report, a bi-annual study reporting on $1 million+ home sales activity in Vancouver, Calgary, Montreal, and the Greater Toronto Area.
According to Sotheby’s, the GTA’s top-tier market had a busy few years leading up to 2018, but then Ontario’s Fair Housing Plan came into play in April 2017, and the mortgage stress test came into effect at the beginning of 2018.
In 2015, top-tier sales increased 48% compared to 2014. Then there was another increase of 77% in 2016 over 2015. In 2017, there was a slight increase in top-tier activity, jumping 5% compared to the previous year.
Despite the Fair Housing Plan and stricter mortgage regulations, the top-tier market rebounded in the second half of 2018. Top-tier sales steadied by last fall with a little help from the condo market.
Overall, $1 million+ sales fell 31% year-over-year in 2018 with a total of 14,255 in the GTA. But, in the second half of the year, sales increased 4% compared to the second half of 2017. The same upward tick occurred during the second half of the year in the City of Toronto. There were 6,562 top-tier sales in Toronto last year, which is 19% lower than 2017, but the second half of the year saw a 5% jump compared to the same period in 2017.
The majority of the top-tier sales in the GTA were priced between $1 million and $2 million, accounting for 12,139 transactions, which is 29% lower than 2017. There were 1,882 sales between $2 million and $4 million, which is 39% lower than the previous year, and there were just 234 sales surpassing $4 million - a 40% year-over-year decline.
Despite a continued shortage in supply, Sotheby’s says that bidding wars calmed last year. And as of January 2, 2019, there were 3,832 top-tier properties listed on the MLS system, which is just three months of supply.
Sotheby’s expects demand for top-tier homes to remain strong through the first quarter of 2019. This prediction applies to the conventional market, too, because single-family homes, especially detached homes, are selling for more than $1 million, though they may not be a traditionally luxurious home (meaning the land alone is boosting the value).
The steady economy and growing population will keep the top-tier market active this year. The GTA’s population grew by 2.5% last year, and population growth is a driving force behind real estate market activity.
In Toronto, the real GDP output increased 3.4% last year and the unemployment rate fell to 6.2%. Sotheby’s expects the demand for $1 million+ homes to outpace supply, which will drive up prices in the top-tier and conventional markets.