Real Estate Demand Stays High at the High End
In the Canadian housing market, this was supposed to be a season of discontent. But top-tier buyers are giving the market legs, as they scour listings for the limited supply of luxury homes.
According to Sotheby’s International Realty Canada, “Demand for luxury and conventional housing continues to intensify as previously sidelined sellers and buyers signal their need and readiness to transact in the season ahead.”
Pent-up demand from the aftermath of pandemic lockdowns is still a factor. Many professionals who fled the cities during COVID, working remotely from Cottage Country or other exurban locations, remember their cosmopolitan lifestyles and have plotted a return to Montreal, Toronto, Vancouver and other exciting places.
This trend is having profound effects not just in big cities, but also in the suburban and rural areas where city exiles established their remote existence, and where prices are now falling. That’s good news for locals, many of whom were priced out of the market in places where they grew up.
Many of the migrating professions have been willing to take a loss on their remote properties, a sign that the allure of urban centers remains strong in Canada, especially for those with the resources to move.
According to Don Kottick, President and CEO of Sotheby’s International Realty Canada: “There has been an immense build-up of demand for housing mobility across Canada’s conventional and luxury real estate market over the past few years, and confidence in the short- and long-term performance of the country’s major metropolitan real estate markets has been unwavering. A significant cohort of prospective home buyers and sellers who were reluctant to make a move in 2022 have now adjusted their expectations to new market norms, and are now pre-qualified, highly motivated and anxious to find a home that meets their needs and lifestyle.”
The Bank of Canada’s program of escalating interest rate hikes has not had the same impact on the high end of the market as at lower price points, where more expensive mortgages have softened sales in many neighbourhoods. In some communities, in fact, more homes have been delisted than newly listed in recent months. Some of this has to do with unrealistic expectations of sellers, who had been accustomed to bidding wars that sent home prices soaring above asking prices.
Taking a broader view, however, it is still sobering to consider that Canadian housing prices have increased 375 percent over the past 20 years, building equity for many families while pricing others out of the housing market entirely.
One factor that may continue to restrict supply across the board is the fact that almost every seller is also a buyer — that is, most will need a new place to live after selling a residence. Current conditions in the real estate market breed apprehension about that prospect. Even when a seller realizes a substantial capital gain when selling a home, those dollars won’t stretch as far when buying a new place.
A report by Storeys summarized this Catch-22: “There is also concern on the part of sellers as to where they’ll move next, which is creating a vicious cycle that’s keeping properties off the market. Meanwhile, some sellers chose to move ahead of schedule when the market was in a frenzy, chewing up inventory that could come to market today.”
