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The demand for single-family homes dominates the market for high-quality apartments
Published on October 24, 2024 • Last updated 3 hours ago • 4 minutes reading time
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A view of the skyline from a condo building in Toronto. Photo by Tyler Anderson/National Post Files
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Luxury condo sales fell across Toronto and Vancouver in the third quarter as demand for single-family homes dominates the high-end housing market, according to a recent report from Sotheby's International Realty Canada.
The report said excess inventory, price declines and favorable terms for investment-focused buyers mean current conditions for luxury property buyers are now the most favorable they have been since 2017, when the federal government first introduced the minimum mortgage threshold for the “stress test”. .
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Don Kottick, chief executive of Sotheby's, said single-family homes are particularly in demand but are not being built in major markets such as Toronto or Vancouver. This means fewer properties are coming onto the market.
“Most of the properties being added will be vertical; It will be condominiums, townhouses or some type of multi-family housing,” he said. “If people don’t have the opportunity to move to another single-family home, they may stay in that particular home and therefore may not come into the market.”
The Sotheby's report said interest rate cuts supported pre-transaction and sales activity in the conventional and prime real estate markets towards the end of the third quarter. However, some homebuyers have delayed completing transactions until 2025 in anticipation of further cuts.
Kottick said many buyers are “sitting on the sidelines” waiting for more favorable terms, but he believes the recent 50 basis point drop in interest rates will lead to more activity among buyers.
“I think the smart buyers are recognizing that there could be opportunities in this particular time… we're going to see a surge in activity,” he said.
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According to Sotheby's, sales of residential properties in the Greater Toronto Area (GTA) valued at more than $4 million increased three per cent year-on-year in July and August, while sales in September increased nine per cent year-on-year. There was a four percent annual increase in luxury single-family home sales, but sales of $4 million luxury condos fell 25 percent compared to last summer, while sales of luxury condos fell 25 percent year over year Value of $1 million decreased by 30 percent.
Condominiums such as townhouses, single-family homes and semi-detached homes generally sell faster than condos in the GTA, according to a study by Zoocasa Inc. Condos stay on the market an average of 35 days, the study found, and condo buyers are looking for lower prices, with Toronto East offering the cheapest properties.
However, there is an oversupply of real estate listings in Toronto this season, which should benefit buyers and investors, Sotheby's said, predicting price declines in the luxury condo market and favorable opportunities for investment-oriented buyers.
Sellers in the GTA set realistic property prices and made necessary concessions in the third quarter, which helped improve negotiations and increase the volume of successful transactions.
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Prices for homes over $4 million rose 18 percent year-over-year with 45 properties sold between July 1 and August 31.
However, in Vancouver, those sales fell 13 percent over the same period. Sotheby's said some of the factors behind this decline include economic and political uncertainty, increased costs of living and concerns about public safety and urban unrest in key neighborhoods.
In Vancouver, single-family homes accounted for 86 percent of total sales, compared to 89 percent last year. Sales fell 52 percent year-over-year in September, and there were no sales of condos valued at more than $4 million.
Sotheby's says Vancouver prices will fall as sellers price their homes competitively, leading to more opportunities for buyers and investors to upgrade or purchase properties before the Bank of Canada makes further rate cuts.
The real estate agent expects the luxury property market to remain broadly stable in the coming months, but Kottick said there could be a potential increase in housing competition in the longer term due to population growth.
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“Over the last, probably five years, the federal government has welcomed millions of new permanent residents,” he said. “When these people come in, a certain percentage will buy, while most people will probably rent. But when they start looking around the market, that puts more pressure on the market.”
Kottick said another component impacting sales is interprovincial migration, particularly buyers looking to relocate to Alberta because of the economic optimism there.
“It’s an economically charged area at this point,” he said. “There are all these different types of influences that impact the market, lots of inputs and outputs. This all determines supply and demand and determines where people want to live.”
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Market conditions for sellers in Calgary are setting records as interprovincial migration and immigration boosted sales of residential properties valued at more than $1 million in July and August by 31 per cent compared to a year ago, Sotheby's said. Sales of luxury real estate in Montreal rose 15 percent over the same period.
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