Cash-rich buyers unfazed by borrowing costs
Canada's luxury real estate market is defying the slowdown in overall housing sales, according to a new report by Engel & Völkers.
How? Many luxury home buyers pay in cash, making them less sensitive to rising interest rates. The report showed that million-dollar-plus homes in Halifax, Ottawa, Toronto, and Vancouver outperformed the broader market.
"Canada's luxury real estate markets are demonstrating impressive resilience despite the slowdown in overall sales," said Anthony Hitt, president and CEO of Engel & Völkers Americas. “While interest rates impact the conventional market, particularly first-time buyers, luxury buyers often pay in cash and are therefore less affected.”
This cash advantage is evident in the numbers. Halifax saw 5% more million-dollar homes sold in early 2024 than last year. In Ottawa, prices for homes between $1-2 million jumped 8%. Toronto's ultra-luxury market (over $8 million) grew nearly 5%, while Vancouver saw similar gains for homes in the $2-4 million range.
But it's not all champagne and caviar in Canadian real estate. The report highlighted a significant drop in investor activity, with the Bank of Canada noting investor purchases have fallen from 30% of the market in early 2023 to levels not seen in a decade.
Condos, typically a haven for first-time buyers and downsizers, are struggling. Millennials find them too small for growing families, while Baby Boomers are staying put in larger homes rather than downsizing to pricey, cramped units.
This lack of competition in the condo market is pushing some buyers who would normally purchase condos into the single-family home market, further intensifying competition there. Engel & Völkers predicted this trend will eventually push buyers back to condominiums.
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Adding to the market's complexity is confusion over Canada's foreign buyer ban. Misunderstandings about the law are reportedly dampening the country's appeal to international buyers and throwing a wrench in new condo development plans.
Still, Hitt projected that "Canada's luxury markets will remain stable as real estate continues to be an appealing and safe investment."
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