Luxury home sales in Oakville, Burlington, Hamilton, and across Greater Toronto Area (GTA) saw a steep decline these past two months, but according to RE/MAX there is no need for concern, because this segment is intended to see plenty of activity throughout the mid-to-back end of the year.
According the 2018 RE/MAX Luxury report released last week, January and February saw a 55% decline in sales year-over-year. To further put this into perspective, this means that only 76 luxury homes were sold above the $3-million price point in the GTA over the past two months. This is a significant decline in comparison to the 180 luxury home sales that transacted over the same time period last year. Moreover, in the $5-million (and above) category, luxury home sales saw a 46% decline to 15 sales, compared to 28 sales the year prior. In Oakville, only 6 homes sold over the $3-million price point this year, compared to 15 sold one year ago. Hamilton and Burlington areas saw 59 homes sold over $1-million this year, down from 133 sold in 2017.
However, VP and Regional Director of RE/MAX, Christopher Alexander, urges consumers not to view 2017 as a benchmark year. A better comparator would be 2016, as sales were more in line. 2017, Alexander states, was an unusually overactive market. “Sales of upper-end homes year-to-date are more in line with 2016 volumes rather than 2017, which should be distinguished as an outlier year for luxury real estate. Any comparison will fall short of 2017 levels throughout much of the spring, but demand for luxury product is likely to improve by early summer and carry through the remainder of the year.”
While sales decreased, home prices went in the opposite direction. For the 76 home sales, the average transaction was $4.2-million, up from $4.1-million logged in 2017. The luxury condominium market, on the other hand, saw an increase in sales compared to the year prior. Sales climbed in January and February with 8 units sold compared to 5 units in 2017; the majority of those condos sold in the city of Toronto (where the Baby Boomers and empty nesters have decided to leave and downsize).
The report also states that there are several economic drivers that will continue to elevate sales across the GTA’s housing market. It retrieved statistics from the Capgemini World Wealth Report, which stated the number of high-net-worth individuals in Canada (majority of which are residing in Ontario) rose 11.3 per cent in 2016, while net worth increased 11.7 per cent. The report also illustrates statistics from Numbeo, a crowd-sourced property price comparison site, which shows that the price per square foot in Toronto’s city centre is sitting at a low $791.17, and as a result, is very enticing to foreign investors. Foreign investors looking to buy property Ontario currently have to pay a 15% tariff, due to legislation passed by the Provincial Government last April. However, Alexander does not believe that it will be a deterrent in their overall investment strategy, but more so the cost of doing business in Ontario.
Overall, RE/MAX expects sales to improve towards the back half of the year, once quality inventory reaches the market and the ambiguity in the housing marketplace disappears. “As market conditions stabilize, and uncertainty regarding rising mortgage rates and more stringent lending practices diminishes, home-buying activity in the top-end of the market will resume a more sustainable pace.”