Trends like multigenerational living, buying second homes and moving to more rural areas may remain popular in the Canadian luxury real estate market for the long haul, according to Engel & Völkers 2021 Mid-Year Canadian Luxury Real Estate Market Report released on Thursday.
As of mid-April, Canadian markets began to cool off and normalize a bit, the global luxury brokerage reported. With rising inventory, there’s less intense buyer competition, which Engel & Völkers predicts will lead to stabilizing prices, especially as borders gradually reopen.
“After an unprecedented run, premium real estate markets are normalizing across Canada’s most in-demand cities, and that’s a good thing,” Anthony Hitt, president and CEO of Engel & Völkers Americas, said in a statement. “At a global level, Canada’s real estate market is largely undervalued. But with low housing inventory and the buyer frenzy we saw in the first half of the year, Engel & Völkers believes the unprecedented demand for luxury properties will sustain. Local demand for luxury housing increased exponentially during the pandemic and international buyers are excited to return after a year of border closures. 2022 will be a year to watch.”
Like many luxury markets in the U.S., “condo demand evaporated” during 2020 in Canadian luxury markets. But investors who latched on to this buying opportunity while demand was low are now beginning to reap the benefits, Engel & Völkers said.
“As global vaccine campaigns rolled out in the first half of 2021, investors made a play for the market and condo sales returned to a steady climb,” the report reads. First-time homebuyers who sought to enter the market and retirees looking to cash in on their suburban homes amid increased demand also contributed to those rising condo sales.
Meanwhile, multigenerational living is a rapidly growing trend, the brokerage noted, citing both anecdotal evidence from Engel & Völkers agents and data from Statistics Canada, which shows multigenerational homes are the most rapidly growing type in the country.
As in the U.S., mortgage interest rates hit historically low levels over the last year-plus of the pandemic. The Bank of Canada’s record low interest rate of 0.25 percent held since March 2020, combined with homeowners holding on to savings, ultimately led to a wave of second (or third or fourth) homebuying. Buyers purchased many of these additional properties in rural areas, with many homeowners, particularly in Vancouver and Toronto, seeking investment properties in rural areas outside of those city centers, Engel & Völkers noted.
Canada’s borders have remained closed since the start of the pandemic, and the resulting pent-up demand from international buyers will likely drive luxury sales in the country’s major cities, the brokerage said. That increased demand, however, may ultimately also put palpable stress on the country’s inventory.
The Halifax market has grown in popularity in recent years with the start of a government incentive program in 2019 to draw residents to the area, as well as the growing prevalence of working remotely, which exploded during the pandemic. Out-of-province buyers have made up nearly half of all home purchases over $1 million since December 2020, according to Engel & Völkers’ data.
Meanwhile, in Montréal, development projects have been ramping up, and Engel & Völkers notes that the city will see an influx of new inventory over the next three years. The city’s luxury market has grown rapidly in recent months, with total sales priced at $1 million or higher growing 115 percent year over year in January, compared to just 17 percent year over year growth for home sales across all prices.
Buyer competition in Ottawa has become heated since the start of 2021, driving both sales and home prices in the region. The number of sales between $1 million to $3.99 million rose 513 percent from January to May 2021 compared to the same months in 2020. As one example of the intense market competition seen in the area, a century farm in Renfrew, Ontario, represented by Engel & Völkers sold for $1.1 million over asking.
Over in Toronto, the metro area is finally starting to see a comeback following a series of COVID lockdowns and over 50,000 residents leaving the area for less populous regions between July 2019 to July 2020. Home sales quadrupled in April while days on market declined by half on homes priced $1 million and up during the first quarter of 2021 compared to the first quarter of 2020.
Vancouver is also on the rise following COVID lockdowns, with a number of buyers seeking properties outside of the city with larger spaces and “resort-style amenities.” At the beginning of 2021, buyer demand surged with units priced at $1 million an up peaking in March. Once borders reopen, Engel & Völkers predicts buyers from feeder markets like Hong Kong and California will flock to the area.