Canada's luxury housing market falls 'back to reality' from heady heights

Good morning!

The buying and selling frenzy that drove Canada’s luxury real estate market to new heights during the pandemic continued to cool over the summer.

Sales and listings of homes priced above $1 million fell across the country in the third quarter of 2022, as both buyers and sellers sat on the sidelines amid a weakening economy, bringing the market “back to reality,” according to Sotheby’s International Realty Canada’s latest luxury real estate report, released this morning.

Climbing interest rates, high inflation, turbulent financial markets and geopolitical pressures, such as Russia’s war on Ukraine, were just some of the factors that led buyers and sellers to sit out the season.

Additionally, a surge in summer travel drove more sellers to retreat from the market, keeping inventory levels even lower than usual in what is typically a slower time of the year for real estate activity.

“Canada’s conventional and luxury real estate markets are undergoing a long-awaited transition after an era of over exuberance during the pandemic, particularly in those regions that saw the most acceleration over the past two years,” Don Kottick, chief executive of Sotheby’s, said in a news release.

“Real estate buyers and sellers are taking a step back to strategize.”

In the Greater Toronto Area, Canada’s largest residential real estate market, sales of condominiums, semi-detached and detached homes priced above $4 million fell 42 per cent compared to the same time last year, when the market was still posting gains. Sales of homes priced above $1 million also fell, declining 39 per cent year over year. In September, they were down 52 per cent on an annual basis.

Vancouver’s market also came off the boil in the third quarter. Inventory “evaporated” and sales of homes above $4 million fell 51 per cent from the record set last summer. Sales of residences priced over $1 million declined 37 per cent. In September alone, transactions of homes on the market for $1 million or more fell 70 per cent year over year, Sotheby’s said.

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