Sotheby’s report released this month shows solid increases in sales, especially for luxury condos
Pandemic-related influences continue to fuel growth in luxury real estate market numbers in the Greater Toronto Area (GTA), according to Sotheby’s International Realty Canada fall market report released this month.
Consumer confidence is rising, the report says, and that translates into rising confidence in city living. However, constraints on top-tier supply have tightened the screws on sales across multiple market segments, leading to short sales cycles and price gains.
Toronto developer Brad Lamb says supply constraints are particularly keen in the detached home luxury market in such neighbourhoods as Forest Hill, South Hill and Rosedale.
“Toronto as a city is getting richer,” Lamb says. “Toronto is becoming a world city. We have an incredibly large super wealthy class living here now, people worth $100-million or more. There are thousands of them. And when you think of the number of houses that will suit those people, there are not thousands of them. I haven’t seen a quality $15-million house [come to market] in Toronto in years. When they come up for sale they would sell with multiple bids, which never used to happen here. People used to have the luxury to take a bit of time, kick the tires, but not anymore.”
The Sotheby’s study says the GTA will continue to see an active market and price acceleration this fall and beyond. The results from this past July and August bear this out. Residential real estate sales over $4-million over those two months were up 12 per cent year-over-year. Six properties over $10-million sold over the two months, compared with four over the same months in 2020. The urban luxury condo market was a real bellwether, with sales of condos over $4-million up 40 per cent year-over-year. As a comparison, luxury single-family home sales over $4-million saw a 15 per cent year-over-year increase compared with the same months in 2020.
Since the start of the pandemic, local luxury condo demand has been solid.— Don Kottick, President and CEO Sotheby’s International Realty Canada
The numbers were comparable between Sept. 1 and Sept. 15, with a 33 per cent year-over-year sales increase for homes over $4-million. The frenetic sellers’ market from the first half of 2021 (276 per cent year-over-year increase in GTA residential luxury sales over $4-million) tapered off during the summer somewhat, as buyer fatigue had set in, and they took themselves out of the market. Sellers also tapped out, reconsidering listing in a market with limited choices. But that’s ramping up again.
However, while the conventional condo market in the GTA saw a temporary sales pullback in 2020, that wasn’t quite the case in the luxury segment, says Don Kottick, president and chief executive officer of Sotheby’s International Realty Canada.
“Since the start of the pandemic, local luxury condo demand has been solid,” he says, “from affluent baby boomers who are wanting to downsize and simplify from their larger homes, from buyers across all generations who moved outside of the city over the course of the pandemic but still want to keep a pied-à-terre downtown, from buyers looking for more affordable options than single-family homes, and from local and international investors who continue to see the financial opportunity in a city that is considered Canada’s business and economic epicentre.”
The affordability of single-family homes, and the demand for more living space post-pandemic, are significant real estate trends impacting condo sales.
“The reality is that, as single-family home prices rise, many people are buying condos and attached homes out of necessity and that this is only going to continue to drive demand and prices for high-density housing,” he says. “These buyers will also be competing against those actively seeking the convenience of the condominium lifestyle, including downsizers and younger first-time buyers. And whether it’s condominiums, attached or single-family homes, luxury buyers are looking for large patios and green spaces.”
There is a desire for top-of-the-line amenities and services at your fingertips, says Mark Mandelbaum, chairman of Lanterra Developments, the developers of 50 Scollard Condominiums and Glenhill Condominiums.
“Today, there is a luxury segment of condominiums driven by this newfound demand,” he says. “Residents are also drawn to the sense of community that comes with this living experience as they’re surrounded by like-minded individuals.”
Josh Shteiman, vice-president of development operations for Platinum Vista, the developer behind No. 7 Dale condo project in Rosedale, says they have noticed an increased demand for larger spaces, both indoors and outdoors, and amenities one wouldn’t find in a traditional home.
Investors are seeing beyond COVID-19 concerns when they buy pre-construction, says Dominic Tompa, vice-president of sales with The Daniels Corporation, which is involved in The Jackson Towns project, a collection of three-storey townhomes located at Keele Street and Eglinton Avenue West.
“Investors are seeing beyond [the pandemic] when they purchase preconstruction real estate,” he says. “Because it’s a longer-term investment where a return won’t be seen in two to three years, as well as with very few people believing we’ll be dealing with COVID at the level we are right now, it’s not as strong of a fear as it once was.”
The luxury market is still predominantly made up by downsizers, Tompa adds. These are people who have retired or are about to. They just sold their home so they have more money to spend, and value lifestyle benefits such as walkability and local amenities.
“But the price still has to be right,” he says. “On the ground floor, we have seen a strong, continued interest in homes that are priced right at the entry of the luxury market.”
Mimi Ng, senior vice-president, residential sales and marketing, for Menkes Developments Ltd., says the real estate market this fall comes down to consumer choice.
The company’s Maison 77 Clarendon boutique luxury project in Toronto’s South Forest Hill is an example of that. The five-floor, 16-residence, up-market condo project answers a calling from luxury buyers wanting to “rightsize” their family home, stay in the same neighbourhood while enjoying a white glove, full-service condo lifestyle.
“Buyers have a lot of options available to them, whether it’s variety in terms of location or neighbourhood, size of building and type of product,” she says.
“Historically, there have been periods where buyers looking for luxury housing, especially high-end condos, had very limited options. But now we are seeing developers bring a large number of luxury offerings to the market, including some projects that were previously delayed due to the pandemic, and some of these are in rarely available locations.”
Other industry players report the same themes that come out of the Sotheby’s report.
There’s been a 144 per cent increase in units sold in the GTA with a price of $2-million and greater over the past year (up to Aug. 31 2021 versus Aug. 31 2020), says Cameron Forbes, a broker with Re/Max Realtron Realty Inc., specializing in luxury homes. Four per cent of those being condo sales and 96 per cent being freehold (detached, semi, or townhomes), so the luxury market is predominantly ground oriented, he adds. The ultra-luxury market ($5-million plus) is trending in a similar fashion.
Buyers have a lot of options available to them, whether it’s variety in terms of location or neighbourhood, size of building and type of product. Historically there have been periods where buyers looking for luxury housing, especially high-end condos, had very limited options. But now we are seeing developers bring a large number of luxury offerings to the market … and some of these are in rarely available locations.— Mimi Ng, Senior vice-president, residential sales and marketing, Menkes Developments Ltd.
Justin Cohen, a broker with Re/Max Realtron Barry Cohen Homes Inc., says homeowners continue to take advantage of substantial equity and low interest rates to trade up to homes that offer greater space, better location and amenities.
“The transfer of wealth that is currently underway is a major contributor to the upswing in luxury home sales,” he says.
“In 2016, CIBC put out a report that estimated a $750-billion transfer to baby boomers over the next decade. We’re starting to see the impact of that transfer on Gen X and millennials as parents and grandparents move to secure homeownership for future generations.”
Michael Kalles, president of Harvey Kalles Real Estate Ltd., did a deep dive into the GTA condo market, and points out the market behaves differently depending on housing types and community. The Greater Toronto Area, he adds, is all about neighbourhoods, and the realities are more hyperlocal.
The fall market is considered the most active, he says, so a buy or sales strategy for a luxury property in one community might differ from another community.
“When you isolate markets, you see that they don’t all behave in the same fashion,” he says.
“If we look at condos in a traditional luxury pocket of midtown like Annex/Yorkville, in Q3 of 2021, we see that there were roughly 20 units sold over $2-million. The average sold price was a little above $4-million. These homes tend to be on the market close to five weeks, selling for roughly 96 per cent of the list price. If we compared that to the Bay Street Corridor or Rosedale, we’d see that suites are also selling below list, but that the average prices are much lower (between $2-million and $2.5-million) and that time on market before a successful sale is made, is closer to two months.
“There are pockets of Markham where, in Q3, the average condo sold for 19 per cent over ask in under 10 days,” Kalles says.
“The pricing and outreach strategy required to sell that condo, with such a big market and short sales cycle, will differ from the promotional strategy required to sell a $4-million condo in Yorkville, which has a narrow market and will require an established network, a specialized sales touch, and unique marketing tools need to broaden the exposure of the listing.”
The return of immigration to the region, which is injecting a new pool of buyers into an already constrained market, as well as escalating prices in the pre-construction condominium market are two story lines to follow on the luxury real estate market front heading into the rest of this year and 2022, Kalles adds.
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