As a record-breaking surge in Toronto home sales starts to spark concern that a bubble may be forming, one part of the market in Canada’s largest city is running even hotter than the rest: the luxury end.

Sales of homes worth more than $4 million (US$3.2 million) surged 157 per cent in January and February from a year earlier, brokerage Sotheby’s International Realty Canada said in a report released Tuesday. By contrast, data from the Toronto Regional Real Estate Board for the same period showed sales across all price ranges rose 52 per cent.

“There’s a huge pent-up buyer demand that’s existing at all areas of the market right now,” Don Kottick, chief executive officer of Sotheby’s Canadian real estate unit, said by phone.

Among the luxury properties that changed hands in the first two months of the year, five sold for over $10 million, compared with just one a year earlier, according to Sotheby’s.

“When you get to that point, you get to be fairly affluent,” Kottick said, so buyers “might have just jumped up in the price range just because of the lack of inventory in the lower ranges.”

Far from triggering a long-feared housing crash, the COVID-19 pandemic has instead pushed Canada’s market to new highs. Job losses have been concentrated among people who rent, while higher-paid professionals able to work from home have taken advantage of record-low mortgage rates to scoop up bigger living spaces.

Those high earners are favoring detached homes. When condos are removed from the mix, Sotheby’s data show a 203% jump in sales.

Risk Warning

Accelerating price appreciation sparked by Toronto’s buying frenzy is raising alarms. Last week, the Canada Mortgage and Housing Corp. bumped up its risk assessment for the city, saying the market is highly vulnerable to a sharp drop in prices. The agency also warned of overheating at the national level as buyers look farther afield for homes.

Home purchases surged even as immigration ground to a halt during the pandemic. The federal government’s plan to increase its targets for new arrivals may give the housing market a fresh boost, particularly at the high end, according to Kottick of Sotheby’s.

“There’s a lot of high-net-worth individuals that are looking to come to Canada because of the stable environment that we have and the fact we are a global destination,” he said. “So I’m very optimistic about how the luxury market is going to remain strong.”