Photo: realtor.ca
Toronto luxury home prices were among the fastest rising in the world last quarter, but a closer look at recent activity shows the Ontario Fair Housing Plan is likely putting a damper on price growth, industry consultancy Knight Frank suggests.
Compared to a year ago, luxury home prices in Toronto soared 20.7 per cent in Q2, according to Knight Frank’s Prime Global Cities Index, trailing only the annual growth of 35.6 reported in Guangzhou, China.
But placing second on a list of 41 luxury markets around the world from Sydney to Paris doesn’t fully reflect recent trends.
“At first glance the rate of 20.7 [per cent] annual growth suggests a level of resilience,” reads a Knight Frank release including the index.
“But quarterly figures show a slowdown,” Knight Frank continues.
On a quarter-over-quarter basis, Toronto luxury home prices were up 5.1 per cent in Q2, fifth fastest overall for that timeline.
But during the first quarter segment, prime prices surged by a steeper 8.5 per cent over the previous three-month period.
“Quarterly figures for Toronto suggest the new foreign buyer tax is having an effect on luxury price growth,” writes Knight Frank, which generally considers luxury, or “prime,” real estate to represent to the 5 per cent of a market value-wise.
The foreign-buyer tax, which was applied to the entire Greater Golden Horseshoe, not just Toronto, was just one of the 16 measures that make up the Fair Housing Plan (announced in April) which also brings expanded rent control to the province and more.
Meantime, prime residential real estate prices in Vancouver, the other big Canadian city where foreign homebuyers are subject to a tax of 15 per cent, appear to be picking up steam once again.
Annual price gains clocked in at 2.1 per cent last quarter putting the market 21st overall, but Vancouver led all cities in terms of quarterly appreciation at a rate of 7.3 per cent.
In the first quarter, three-month price appreciation only registered at 1.5 per cent.
However, recent quarterly price gains observed by Knight Frank don’t reflect what Jason Soprovich, a luxury home specialist and realtor in Vancouver, has seen in the upper tiers of the low-rise segment.
“I would say that there probably hasn’t been an uptick in luxury sales… I would say that [prices] probably have cooled also — it’s not what it was,” Soprovich tells BuzzBuzzNews.
Soprovich says the low-rise market has “plateaued more or less” amid financial tightening, rising interest rates, a new government and, of course, the foreign-buyer tax, though he does expect it to pick up this fall.
But the condo market — even at more expensive price points — has already heated up.
“Condominiums are a completely separate market now… and they’ve been doing exceptionally well,” he notes in an interview.
Those with larger houses in West Vancouver are downsizing to high-priced condos downtown, while entry-level buyers are flocking to the last affordable segment in Canada’s priciest big city.
“It’s sort of double-edged sword,” Soprovich says.
Kevin Skipworth, an owner/managing broker at Dexter Associates Realty which assists Knight Frank with index data for Vancouver, says the strength of the sub-$3 million market, especially the condo segment, explains Q2 price increases in Vancouver.
“The strata market especially has been performing this way due to lack of supply and strong demand,” Skipworth tells BuzzBuzzNews. “That is really what is driving the index as opposed to the luxury market,” he adds.
