Demand for luxury homes in Vancouver is so high that shoppers are willing to pay a premium for residences that already have buyers, spurring people with deals in place to flip the properties.
Rising demand has led to an increase in bidding wars, more sales over asking price and a greater number of "contract assignments," where buyers sell their rights to a home before completing their purchases, Sotheby's International Realty Canada said Thursday. In the first half of 2015, 2,465 Vancouver homes sold for $1-million or more, up 48 per cent from a year earlier, the brokerage said in a midyear report on luxury real estate.
"The person who wins the bid says, 'Listen, there are two other people here who desperately want that home and will pay $500,000 more,'" Ross McCredie, chief executive officer of Sotheby's International Realty Canada, said in a telephone interview from Vancouver. Losing bidders often offer 20 per cent more than the list price, and the buyer flips it for even more, he said. "We're seeing it more and more."
High consumer confidence, increased foreign demand and low interest rates helped boost sales of single-family detached homes, attached homes and condominiums in all high-end price ranges in Vancouver. In the $4-million-plus category, 219 properties sold, up 71 per cent from a year earlier, Sotheby's said.
The starting point for a luxury house in the city jumped to about $3.5-million, the highest in Canada, the brokerage said. In Toronto, sales of the priciest homes also continued their rally as a weaker Canadian currency helped prop up demand. Both locals and international buyers were drawn to Canada's luxury market, according to the Sotheby's report.
The luxury housing market is booming along with demand for lower-end homes. Last month's sales of all Toronto residences reached a record for June, according to the local real estate board. Prices rose more than 12 per cent from a year earlier as high-end properties made up a larger portion of transactions.
Sotheby's forecasts that sales in the priciest category – homes worth at least $4-million – will climb for the rest of the year amid the type of competition that's led to bidding wars and flipping.
"It's a lack of supply in specific neighboorhoods," Mr. McCredie said. "There's a genuine fear in the market that you either need to stay in the market or you need to get into the market or you'll never get in."