Luxury real estate prices in Canada have remained resilient so far this year, despite dropping sales volume as sellers and buyers adjust to new housing market measures, according to a report Thursday from brokerage Royal LePage.
Tighter mortgage lending rules in the form of a stress test—implemented at the beginning of the year and designed to make sure borrowers can afford mortgages at a time of rising interest rates—created market turmoil as buyers moved to the sidelines in order to scrutinize the impact on luxury home prices, the report said. This was compounded by tax increases for all homes over C$3 million (US$2.35 million) in British Columbia, and a non-resident property tax in Ontario.
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"Home prices in Canada’s luxury real estate market have remained remarkably resilient when you consider the economic headwinds that serial government interventions have created," said Phil Soper, president and CEO of Royal LePage, in the report. "The resilience of home values reflects the strong aspirations of luxury buyers to reside and work in cities that are consistently ranked among the most desirable on the planet."
During the first four months of 2018, the median price for a luxury condo in the Greater Vancouver and the Greater Toronto areas rose 7% and 10.4% respectively compared to the same time last year. Price growth for luxury condos outpaced that of luxury detached homes, which logged rises of 5.2% and a fall of 0.2% respectively, according to the report.
The increased price growth for condos reflects a demographic shift across North America, Mr. Soper said.
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"Baby Boomers are finally exiting their large family homes, and luxury condos—with their low maintenance lifestyles—are the favored destination," he said. "Contrary to popular belief, wealthy home buyers are price sensitive, too. They didn’t reach the point in their lives where they have the capacity to acquire high-value real estate without being financially astute. Luxury condominiums represent value in today’s market."
During the same time frame, the median price of a luxury condo in the Greater Montreal Area and in Ottawa rose by 3.9% and 4%, respectively, while in Calgary condo prices fell 6.1%.
Houses in these regions performed better. The Greater Montreal Area logged the largest price gain in the detached luxury home segment, increasing 9.1% to $1.56 million. In Ottawa, luxury homes rose in value by 6.3% and in Calgary 0.6%, according to the report.