Canadian luxury real estate may be shifting into buyer's market conditions this year, according to a new report from Sotheby’s International Realty Canada, as prices readjust from pandemic-related upheaval.
The report issued Wednesday said buyers and sellers retreated from the luxury market in 2022 as the housing market responded to challenges like interest rate hikes, high inflation and regulatory challenges, setting the stage for prices to cool this year amid continued demand for housing.
Don Kottick, president and CEO of Sotheby’s International Realty Canada, said luxury housing segments in some Canadian metropolitan areas were either approaching or already in buyer’s market conditions by the end of 2022, and he predicted another “important adjustment” on pricing on the horizon in the coming months.
“It has taken several months for home sellers to realize the impact of the changing market on the market values of their properties. As new property listings come onto the market in 2023, their pricing will shift to meet current realities,” Kottick said in a written statement.
“This will start to unlock long-awaited opportunities for buyers and upsizers to purchase homes that meet their lifestyle needs as they acclimatize to the market.”
Sotheby’s report found luxury sales fell year-over-year in major Canadian cities. In the Greater Toronto Area, residential real estate sales over $4 million fell nearly a quarter from 2021 to 2022, and sales over $10 million fell 29 per cent.
Vancouver also saw a sharp decline in high-end real estate sales, particularly in the first quarter of the year, with residential sales over $4 million falling by 30 per cent by the end of 2022. Residential sales over $10 million fell 46 per cent from 2021 levels.
The report said Montreal’s luxury real estate market “tempered to more balanced conditions” over the course of last year, with residential sales over $4 million close to 2021 levels and an 18 per cent annual decline in sales activity for homes over $1 million.
Calgary was an outlier that outperformed other metropolitan areas and saw sales of homes over $1 million rise 16 per cent from 2021 to 2022. Sales over $4 million grow 50 per cent, the report said, with six properties sold in that price range. The report said the city’s strong economy “ignited consumer confidence” while interprovincial migration contributed to growing demand for housing.
Kottick noted that housing deficits will continue to challenge housing markets in major cities in 2023, and while prices are expected to go down, pent-up demand and immigration population gains “will continue to support housing values in the long term.”
New policies aimed at limiting foreign participation in the housing market “will have a negligible effect on affordability” and have confuse d prospective new Canadians, he added.